A worker argued that the method her employer used to determine her salary was discriminatory because male employees were paid more for performing the same work.

What happened. In 1998, Jenny Wernsing started working as an internal security investigator II for the Department of Human Services (DHS) for the state of Illinois. Before landing this job, she had been earning $1,925 monthly with the Southern Illinois Enforcement Group. In her new role, she was paid $2,478 per month--nearly 30 percent more, but the lowest pay rate for her job classification. The highest possible rate was $4,466.

DHS pays lateral entrants at least the same amount they had previously been earning, plus a raise, if possible, under the pay scale for the new position. Others hired by the department made more money than Wernsing because they came from higher-paying jobs. For example, Charles Bingaman, who was hired at the same time as Wernsing, was given a monthly salary of $3,739, up from $3,399 at his previous job with the state. Wernsing and Bingaman performed the same work in their new capacities despite a $1,261 difference in their monthly pay.

Wernsing claimed that this salary-setting practice violates the Equal Pay Act of 1963. However, a district court and the U.S. Court of Appeals for the 7th Circuit, which covers Illinois, Indiana, and Wisconsin, disagreed with her allegations.

What the court said. The appeals court noted that while the Equal Pay Act prohibits differences in pay that are based on gender, it also exempts pay differentials that are "based on any other factor other than sex." Citing three previous 7th Circuit decisions, the appeals court said that prior wages are considered a "factor other than sex."

The appeals court disagreed with Wernsing's argument that DHS doesn't have an "acceptable business reason" for its salary-setting practice. This practice is advantageous to the department because the higher pay makes the job more appealing to the most qualified candidates, the court noted.

The court also wasn't convinced by Wernsing's argument "that because women earn less than men from private employment, all market wages must be discriminatory and therefore must be ignored when setting salaries." Although research has shown that women make less than men on average, there are other factors involved, such as the fact that women tend to step out of the workforce to raise children for longer amounts of time than men, thus giving them less experience, according to the court.

If women who worked in "feeder" jobs for DHS were paid less than their male counterparts on the basis of sex, "then using those wages as the base for pay at the Department would indeed perpetuate discrimination and violate the Equal Pay Act," the court said. However, Wernsing didn't offer evidence to support such an argument (Wernsing v. Department of Human Services, State of Illinois, No. 04-2225, U.S. Court of Appeals, 7th Cir., 10/21/05).

What to remember. Here are ways to prevent charges of salary-setting:

• Review your pay practices. Make sure male and female employees are paid equal wages for performing the same work. If not, make sure any pay differentials are due to merit, seniority, previous salary, or other "acceptable business reason"--not gender.
• Look at the whole picture. When checking your pay practices for mid- and upper-level positions, don't forget to review salary-setting practices for entry-level jobs as well, especially if you use those initial wages as the basis for determining pay at higher levels. In this case, the court noted that if salaries in the department's "feeder" positions were set on the basis of gender, this would create equal pay issues with higher-level positions.
• Put your policy in writing. Clearly explain the guidelines of your merit, seniority, bonus, or commission programs, and make sure all affected employees have a thorough understanding of the programs.