Seyfarth Synopsis: This is the third in a series of posts covering recent trends in equal pay litigation. This post discusses how plaintiffs have sought to expand the possibilities of an equal pay claim by whittling away the defenses allowed to employers. In particular, plaintiffs’ counsel have argued that an employer cannot rely on a policy or practice as a defense if that policy or practice is itself discriminatory in nature or effect. One highly visible example of this trend is plaintiffs’ sometimes-successful efforts to delegitimize the use of salary history to set starting salaries. Some courts and state legislatures have decided that this practice only perpetuates historical pay inequities. More recently, enterprising plaintiffs’ counsel have attempted to expand this concept to other seemingly gender-neutral practices that employers often use to justify pay disparities.

This is the third in a series of posts examining the new and developing trends in equal pay litigation identified in Seyfarth’s yearly publication, Developments in Equal Pay Litigation, 2022 Update. Our first and second posts examined the nature of the burden-shifting framework used to decide cases under the federal and state equal pay statutes and, in particular, courts’ efforts to clarify the parties’ respective burdens under that framework. This post examines employers’ available defenses to an equal pay lawsuit, but not as they relate specifically to the burden-shifting paradigm. Rather, this post examines plaintiffs’ recent efforts to expand the logic of a line of cases (and legislative action) that undercuts employers’ use of prior salary to set a new employee’s starting salary. The gist of the argument being pushed by the plaintiffs’ bar is this: employers may not rely on a policy or practice as a defense to an equal pay lawsuit if that policy or practice is itself tainted by bias.

Recent victories for plaintiffs on the salary history issue in some courts and statehouses arguably jump-started this trend. Different federal circuit courts have come to different conclusions about that practice. The Ninth Circuit has arguably taken the strongest stance against it, holding in a recent landmark decision, Rizo v. Yovino, that salary history, by itself, can never justify a wage disparity because that salary history may be reflective of historical wage disparities prevalent in the marketplace. Setting a new employee’s pay based on inequitable past compensation only perpetuates the inequity into the future.

Some equal pay plaintiffs have sought to capitalize on that reasoning to further narrow the scope of an employer’s defenses, arguing that any factor that an employer uses to justify a pay disparity must be free of bias. For example, employers sometimes argue that disparities in starting pay are the result of the fact that some employees negotiate harder for a higher starting salary. Plaintiffs have increasingly challenged that defense, arguing that the negotiation process is inherently biased against women. Although this tactic has found some success in the courts, that is still the exception. Negotiation is still considered a viable defense in most cases where it plausibly explains a pay disparity.

But equal pay plaintiffs are getting ever more creative with this line of argument. In one recent case, Douglas v. Alfasigma USA, Inc., No. 19-cv-2272, 2021 WL 2473790 (N.D. Ill. June 17, 2021), a pair of sales representatives alleged, among other things, that they were underpaid compared to their male colleagues. The employer argued that the complaint was self-defeating in that it acknowledged that the male comparators were given more favorable sales territories, which would explain the pay disparity: “[Employer] argues that Plaintiffs have pled themselves out of court by alleging that [supervisor] gave them unfavorable territory compared to their male counterparts. . . . [Employer] basically reads the complaint as an admission that Plaintiffs were less productive than their male counterparts.” Id. at *10. The court rejected this argument, holding that an employer cannot justify a wage disparity by pointing to actions that are themselves alleged to be discriminatory in nature, explaining that “[t]aking away sales opportunities cannot defeat a sex discrimination claim when taking away sales opportunities was an act of sex discrimination.” Id. at *11.

The reasoning of this decision presents a rather frightening prospect for employers. In its most extreme form, such an argument would allow plaintiffs an angle to attack any factor justifying a wage disparity, however reasonable, simply by claiming that the factor itself is infected with bias. Thankfully, the state of the law is not yet so dire. Such arguments have been met with a critical eye in some courts. For example, in Spellers v. United States, No. 157 Fed. Cl. 171 (Ct. Fed. Cl. 2021), a female computer scientist brought an equal pay claim against the Department of the Navy. Even though she was paid according to a sophisticated and highly structured merit-based system (“STRL”), she argued that the system could not function properly without good data about her actual duties and her performance, both of which she alleged were infected with gender bias. The court dismissed those arguments, finding them to be nothing more than speculation: “Because plaintiff acknowledges that the STRL pay system is facially gender-neutral when functioning as intended and with good data, . . . she has conceded the viability of defendant's affirmative defense.” Id. at 177.

This trend has been developing for several years in the wake of the critical salary history line of decisions. It appeared first with respect to salary negotiation, which seems only slightly removed from the prior salary history issue. But recently, enterprising plaintiffs’ counsel are attempting to stretch the boundaries of this line of argument, thereby stretching the limits of a cognizable equal pay claim even further. The advantages for plaintiffs in doing so are clear. If they can sow doubt about an employer’s proffered justification for a wage disparity, they may more easily get their lawsuit over the hurdle of summary judgment. And as most employers know, once an employment case is inexorably headed for trial, the incentives to settle, even at a premium, increase dramatically.

These and other trends impacting equal pay litigation are discussed in much greater detail in Seyfarth Shaw’s yearly report, Developments in Equal Pay Litigation, 2022 Update. We highly recommend that report to any employer facing equal pay litigation, or who may simply wish to learn more about these trends so they can avoid such lawsuits in the future or keep abreast of changes in federal and state equal pay legislation. We look forward to continuing to share our analysis of these issues.