By Martin J. Regimbal

The federal trial court in Aberdeen, Mississippi recently addressed an employee's Equal Pay Act (EPA) claim. The Act requires that all employees who perform equal work receive equal pay unless a pay differential is justified by a factor other than sex. Although the employer provided reasons for the pay disparity that were unrelated to sex, the court held that the employee's claim should be heard by a jury. The case is worth a close look.

Facts

Tamra Renee Guest-White was a longtime employee of Checker Leasing, a vehicle leasing business. She worked up to a regional manager position and was responsible for facilities in Greenville, Starkville, Meridian, and Columbus as well as a location in Paducah, Kentucky. In 2013, Checker Leasing suffered significant losses, with 53% of the losses attributable to Guest-White's region. The losses totaled approximately $375,000.

Faced with the losses, Checker Leasing decided to eliminate one of its regions and incorporate it into the remaining regions. Because Guest-White's region had the lowest revenue and largest losses, Checker Leasing decided it should be incorporated into the other two regions. Thus, Guest-White's services were no longer needed. Nevertheless, the employer offered her a different position, which she declined. Guest-White claimed she had been terminated, while Checker Leasing maintained she resigned.

Guest-White filed suit, claiming that her separation from employment was discriminatory and that her pay was not equal to the wages of Mike Evans, a male regional manager, in violation of the EPA. Checker Leasing asked the court to dismiss the equal pay claim, but the court declined to do so, holding that Guest-White was entitled to present the claim to a jury.

Court's decision

The court began its analysis by examining the origin of EPA claims and the standard for establishing such claims. The court noted that the EPA was enacted by Congress as an amendment to the Fair Labor Standards Act (FLSA). The EPA essentially prohibits employers from paying employees who perform equal work differently based on sex.

To establish a claim under the EPA, an employee must demonstrate, among other things, that she held a position requiring equal skill, effort, and responsibility as an employee of the opposite sex under similar working conditions and that she was paid less. The court noted that Guest-White had to show that the pay disparity was based on her sex and was not attributable to another factor and that Evans held a position that required virtually identical skills, effort, and responsibility.

However, the court explained that if Guest-White satisfied that burden, Checker Leasing would have an opportunity to show that any pay disparity was justified by one of the EPA's exceptions. Under the EPA, a pay disparity is justified if it is based on (1) a seniority system; (2) a merit system; (3) a system that measures earnings by the quantity or quality of production; or (4) any factor other than sex.

The court pointed out that the fourth exception serves as a catch-all that could apply to pay disparities that result from a job's unique characteristics; an employee's experience, training, or ability; or exigent circumstances connected with the business.

The court noted that the exception could apply when a pay disparity is the result of an employer's financial condition or changes in its financial condition. For example, a pay disparity could be explained if an employee was hired during a depressed market or there was a decline in revenue during the employee's tenure.

Although EPA claims follow the familiar burden-shifting scheme applicable to discrimination claims filed under Title VII of the Civil Rights Act of 1964, there is a key difference. In Title VII claims, an employer merely has to articulate a reason for its conduct, and then the employee has the burden of proving to a jury that the reason is not true and that discrimination is the real reason.

In EPA claims, an employee only has to point to a pay disparity, and then the employer bears the burden of proving to a jury that the pay disparity was justified by one of the EPA's exceptions.

The court analyzed Guest-White's claim under those standards. According to the court, she demonstrated that her position required the same skill, effort, and responsibility as the position held by Evans. Checker Leasing, however, pointed to a number of factors it claimed justified the pay disparity between Guest-White and Evans.

For example, Checker Leasing pointed out that Evans was hired in 1991 and that he had previous experience as an owner of a car rental company that was operated much like Checker Leasing. Additionally, the employer presented evidence that Evans' region generated 36% of its revenue, while Guest-White's region brought in only 18% of its revenue.

Checker Leasing also emphasized the significant financial losses in Guest-White's region. Despite that evidence, the court held that the employer did not sufficiently demonstrate that it was unable to compensate Guest-White at the same level as Evans. Guest-White v. Checker Leasing, Inc., U.S. District Court N.D. Mississippi, 2016 WL 595407.

Takeaway

The court's holding is interesting for a couple of reasons. First, the court took the time to identify the factors that legitimately implicate and fall within the EPA's fourth exception and explain a pay disparity. However, it held that Checker Leasing did not establish a sufficient justification for the pay disparity despite presenting evidence relevant to those factors.

Second, the court stated that Checker Leasing failed to establish that it was "unable to compensate" Guest-White at the same level as Evans. That statement is interesting because the EPA does not pertain to an employer's ability to pay. The Act attempts to ensure that employers do not pay employees who perform work that requires equal skill, effort, and responsibility differently because of sex.

The court's apparent misapprehension of the issue might very well explain why it held that Checker Leasing's evidence was insufficient. None of Checker Leasing's evidence pertained to an inability to pay. Rather, its evidence pertained to the question of whether the pay disparity was based on a factor other than Guest-White's sex.

Regardless of whether the court's decision was the result of an improper focus or information that was not readily ascertainable from its opinion, employers should make sure that pay decisions are consistent and periodically review employees' compensation to determine whether pay disparities exist.

If a disparity exists, look carefully to determine the reason for it. Also, it is important to note that employers are prohibited from correcting pay disparities by lowering the wages of a comparator employee. That makes it even more important for employers to avoid pay disparities in the first place because correcting them can be costly.

Martin J. Regimbal, a shareholder of The Kullman Firm, and an editor of Mississippi Employment Law Letter, can be reached at 662-244-8824 or mjr@kullmanlaw.com.