Male CEO’s ‘self-inflated’ pay, authorized or not, admissible in female exec’s EPA suit
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Thursday, August 24, 2017

Male CEO’s ‘self-inflated’ pay, authorized or not, admissible in female exec’s EPA suit

By Marjorie Johnson, J.D.

Evidence regarding a former male executive’s allegedly “self-inflated” pay would be allowed during a female chief operating officer’s looming trial on her Equal Pay Act claims since it was debatable whether her employer approved the pay, which was reflected in its tax records. Denying the employer’s motion in limine, a federal court in Louisiana also refused to exclude evidence relating to the employer’s alleged EPA violations in relation to three former employees, as well evidence of salaries received elsewhere to demonstrate the reasonableness of her expert’s calculations (Fontenot v. Safety Council of Southwest Louisiana, August 18, 2017, Brown, N.).

The plaintiff claimed her employer violated the Equal Pay Act (EPA) by paying her less than the former male CEO and retaliating against her after she complained. The district court had already granted her motion for partial summary judgment, finding that she proved her prima facie case of wage discrimination. At issue now was the employer’s pre-trial motion in limine, in which it sought to exclude evidence relating to the compensation of three former employees, the male CEO’s “improperly inflated” pay, and the compensation of persons who worked elsewhere.

Other workers’ salaries. The employer sought to exclude certain evidence of alleged violations of the EPA in relation to the three former employees (other than the CEO). Specifically, it argued that the jury shouldn’t hear evidence that another female employee had complained that the male CEO paid her a lower salary than a male peer, that the employer had “concerns” that the male CEO had a higher salary than his female predecessor, and that a male employee who performed different work than the plaintiff was paid more.

Rejecting the employer’s assertion that this evidence was not relevant, the court noted that when it previously denied the employer’s motion for partial summary judgment, it found the evidence suggesting the employer had twice considered whether its pay practices violated the EPA created a triable issue as to whether it acted willfully by recklessly disregarding whether the plaintiff’s salary violated the EPA. Moreover, evidence that it paid her male peer more than her before she became an executive might show that, if it considered his pay in determining what to pay her as COO, it was perpetuating past prejudice. This was relevant to the pretext analysis.

The court also rejected the employer’s assertion that evidence regarding the three other employees’ pay would create “mini trials,” thus wasting time or confusing or misleading the jury. She was not offering the evidence to prove that the employer discriminated against her based on a “pattern or practice” of gender discrimination, but rather to show that it willfully violated the EPA by recklessly disregarding whether its pay practices violated the EPA.

“Inflated” pay. The court also rejected the employer’s bid to exclude evidence of certain “inflated” pay that the male CEO had received by paying himself excessive amounts without its knowledge or approval. The employer argued that allowing such evidence would waste time by creating a “mini trial” on the issue of his misconduct and confuse a jury to believe that the pay disparity between him and the plaintiff was larger than it actually was. In response, the plaintiff urged that the jury was entitled to consider those amounts when considering her backpay since the record showed that the employer approved them, as reflected on his W-2s and the employer’s Form 990s.

Were they approved? It was apparent that the parties vigorously disputed to what extent the CEO’s actual payments were authorized by the employer. This was a “central factual issue” of the plaintiff’s claims regarding the amount of pay disparity and of the employer’s defense as to why it paid her differently than the CEO. And because evidence of what the CEO was actually paid was relevant—as evidenced by the employer’s tax records—its introduction would not mislead the jury or waste time by creating a mini trial on the issue of the CEO’s misconduct.

Salaries of individuals employed elsewhere. Finally, the court denied the employer’s motion to exclude evidence relating to salaries of individuals employed elsewhere. The employer argued that pay rates at other entities were not relevant to whether it violated the EPA here, since the EPA provides a “geographic limitation” to a comparison of employees in the same establishment with the same employer. In opposition, the plaintiff argued that these pay rates were admissible because her expert used them to check the reasonableness of his calculations of the CEO’s future pay. Notably, she did not claim that she intended to use this evidence for any purpose other than as her expert’s method for ensuring the reasonableness of his calculations of the CEO’s future pay.

The court had already concluded that such evidence was admissible, but noted that it agreed that evidence of pay rates outside of the employer were not relevant to the issues of whether the employer paid the plaintiff in violation of the EPA, nor should the jury use those amounts to calculate any amount of backpay owed to her. However, proper jury instructions would prevent the jury from being confused and misled about the relevance and applicability of those numbers to the facts it must decide. Accordingly, the court declined to exclude evidence relating to pay rates at other entities to demonstrate the reasonableness of the expert’s calculations of the CEO’s future pay.

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