For employers defending an equal pay act (EPA) discrimination claim, the “factor other than sex” affirmative defense generally prevails, except when it doesn’t. And lately, courts have been more reluctant to accept the affirmative defense. 
In the case decided at the beginning of the year, EEOC v. Maryland Ins. Admin., 879 F.3d 114 (4th Circuit Court of Appeals. January 5, 2018), the EEOC shredded the employer’s defense, a decision upheld by the 4th Circuit Court of Appeals. Three female employees sued their employer, Maryland Insurance Administration (MIA), alleging salary discrimination. All were hired as fraud investigators and claimed that they were not paid the same as similarly titled male employees.
MIA is an agency under the state of Maryland, required to follow its laws for setting salary. In accordance with the Standard Salary Schedule, when a new employee is hired, MIA assigns that employee to a grade level matching the position being filled. Each grade level carries an assigned base salary and a specific salary range consisting of 20 separate steps. After designating a new employee's particular grade level, MIA assigns the new hire to an initial step placement based on prior work experience, relevant professional designations, and licenses or certifications. In selecting a particular step level, MIA also considers the difficulty of recruiting for the position, and, under Maryland law, also awards a new employee credit for any prior years of service in state employment.
MIA advertises minimum and preferred qualifications for the position of fraud investigator which starts at grade 15. To be minimally qualified for hire as a Fraud Investigator, an applicant must have five years of fraud investigatory experience in such areas as white-collar crime, financial fraud, insurance fraud, and investigations conducted under the supervision of prosecutors or other attorneys. Preferred or desired qualifications for the position include designation as a Certified Fraud Examiner, as well as experience working with attorneys and participation in court or administrative hearings.
The women hired had experience. The first one was a fraud investigator for a federal credit union for over two years and was employed as a criminal investigation and litigation paralegal for 12 years in the Baltimore County State's Attorney's Office. MIA assigned her to grade level 15, step four. The second had a bachelor's degree and had more than 20 years of experience working for the Baltimore City Police Department with 13 years of investigative experience. MIA assigned her to grade level 15, step four. The third transferred in from another department in MIA and had eight years as a police officer and a detective with the Baltimore County Police Department. Immediately before being hired at MIA, she worked for an insurance company as a special investigator and an adjuster. MIA assigned her to grade level 15, step five.
Comparing these hires with similarly situated male hires, one male held both a bachelor's and a master's degree in criminal justice and had nearly 20 years of investigative experience working for various insurance companies and Maryland's Office of the Inspector General. He also had obtained a Certified Fraud Examiner designation. MIA assigned him to grade level 15, step 10, with a starting salary of $49,842. A second had about 10 years of insurance-related investigative experience when he was re-hired at MIA in 2006 and had earned the designation of Certified Fraud Examiner. He was hired into grade 15, step six, with a starting salary of $45,298. Another had 11 years of experience as a Natural Resources Officer with the state of Maryland, primarily engaged in conducting marine patrols, and had worked for three years as an investigator in the Office of the Public Defender in Baltimore. He was hired into grade 15, step six.
There were others, but essentially, when men were hired into the roles regardless of the experience, they would be hired into grade level 15 step six minimum where the women were generally hired into step four, regardless of their experience.
The trial court ruled in favor of MIA at summary judgement stating that the comparators used by EEOC to prove its case did not overcome the issue of a “factor other than sex.“ The 4th Circuit disagreed and reinstated the case. Specifically, the 4th Circuit stated that “[w]hile an employer may be entitled to summary judgment on an EPA claim if the employer establishes an affirmative defense as a matter of law, the burden on the employer necessarily is a heavy one.”
The court then found that the record showed that the claimants and the male comparators performed substantially equal work and all held the same position as fraud investigators. MIA did show that four male employees made less than the women, but the court stated that “[a]n EPA plaintiff is not required to demonstrate that males, as a class, are paid higher wages than females, as a class, but only that there is discrimination in pay against an employee with respect to one employee of the opposite sex.” The court then found that there was documentation showing that the decisions for starting salary were based on factors other than sex, like experience, etc. In effect, the 4th Circuit questioned the reasoning behind the setting of the salaries, as the women had generally as much or more fraud investigative experience as their male counterparts.
The takeaway for HR in this situation is to document the reasons for starting salary by doing a comparator analysis of other individuals in the title with the same experience, education, and any other factor for setting salaries. Pay transparency is becoming the norm. Any decision should be well documented and not be viewed as arbitrary and capricious.
Source: Jackson Lewis 10/29/18