Last week everythingpeople.™ This Week! reported on a new comparable worth statute adopted by the state of Massachusetts. The new state law changes equal pay for equal work, a long standing pay equity principal and creates a new measurement that attempts to equate the “value” of one job as equal to the value of a different job. However, a recent case in Michigan still supports equal pay for equal work.
The court case at hand, Schleicher v. Preferred Solutions, Inc. No. 15-1715 (8/2/2016) was brought in Michigan and looks at pay discrimination under the federal Equal Pay Act (EPA). It applies the equal pay for equal work principal to a pay discrimination claim. It is informative as to how equal pay principals should be examined by employers when establishing different pay for the same job.
The Plaintiff, Trevor Schleicher, was hired under a pay at risk plan whereby he and another employee, a female, were offered two types of pay plans. Schleicher chose the pay plan that was riskier but paid 20% from the group’s profit pool defined by the pay plan. The female employee chose the second plan of $100K and 10% draw rather than put her entire pay under pay at risk.
For four years between 2009 and 2013 Schleicher earned over $694,159 more that his female counterpart. One would think she would be the one to sue for pay discrimination. That was not the case here. Schleicher had a falling out with the CEO of the firm in 2013. The CEO decided to change Schleicher’s pay plan to the same one his female counterpart was under, thus lowering his pay. At the end of that same year the CEO terminated Schleicher. Schleicher then sued for pay discrimination stating that the employer violated the EPA because it paid him more than the female employee and then lowered his pay to match the female employee’s pay plan.
The lower court held no violation of either the EPA or Michigan’s Elliott-Larsen Civil Rights Act occurred and granted the Defendant-employer summary judgement. Schleicher appealed to the Sixth Circuit Court of Appeals. The Sixth Circuit reiterated the EPA’s primary principal that “prohibits employers from paying and employee at a rate less than that paid to an employee of the opposite sex for performing equal work.” Schleicher v. Preferred Solutions, Inc. No. 15-1715 (8/2/2016) page 8.
The Plaintiff’s pay discrimination claim rests on the somewhat counter-intuitive situation where because his pay was: 1) maintained at a higher rate than his female counterpart this was a violation of the EPA and 2) because the employer lowered his pay plan down to what the female employee made this too was a violation of the EPA.
How did the Court look at this claim?
The Court held First, that in order to establish pay discrimination the Plaintiff must show that an employer paid different wages to employees of different sexes “for equal work on jobs the performance of which requires equal skill, effort and responsibility, and which are performed under similar working conditions.” Beck-Wilson 441F.3rd at 359. This is the equal pay for equal work principal. The Sixth Circuit found that there was a difference in pay.
Second, to counter a case of pay discrimination the Defendant employer must “prove that the wage differential is justified under one of four affirmative defenses outlined in the act: 1) a seniority system; 2) a merit system; 3) a system which measures earning by quantity or quality of products; or 4) any other factor other than sex.” These criteria and a couple more are also in the new MA law as an employer’s defense.
Lastly, if the Defendant can show they meet one of the affirmative defenses above, the burden of proof then shifts to the Plaintiff to show that the proffered defense is just a pretext.
At first glance, the Sixth Circuit found no problem with the Plaintiff’s EPA case. But, the Plaintiff-employer successfully argued, and the Sixth Circuit agreed, that because both parties were offered the equal choice of the same pay at risk plans, this was sufficient to meet the requirements of the affirmative defense principal. Because both parties were offered the same choice of plans, this pay program was not a violation of the EPA because it was based on a factor other than sex.
Finally, and this is important to keep in mind when considering adjustments to discriminatory pay, Schleicher argued that when the employer lowered his pay unilaterally it violated the EPA. The Sixth Circuit disagreed. It held that because the employer was not engaged in any pay discrimination to start with, the employer was free to modify its pay plan and lower the employee’s pay without violating that provision of the EPA.
As we stated in last week’s article, to ensure compliance with the Equal Pay Act, employers should review pay practices to confirm that they are paying legally. If pay disparity exists within a job class, and there is not a defensible reason for it as outlined above, the employer should increase pay to adjust for discrimination—not reduce it. Comparable worth as a legal requirement removes an important employer legal right to pay in a free market system. Be sure to comply with the Equal Pay Act in order to avoid Michigan passing a comparable worth law.
Source: Schleicher v. Preferred Solutions, Inc. No. 15-1715 (8/2/2016) Sixth Circuit Court of Appeals