Over the past 18 months, the stresses of the COVID-19 pandemic have had a jarring impact on the American labor market. Many of the companies that were forced to dramatically downsize their workforces in response to the onset of the pandemic are now the same companies struggling to fill the vacancies in their labor forces as the economy recovers. According to the United States Department of Labor ("USDOL"), a record number of workers – approximately 4.4 million – quit their jobs in September 2021. This instability in the labor market has particularly impacted female workers. Since the onset of the pandemic, 57.5% of jobs lost were positions that had been worked by women. As schools have reopened, job opportunities have increased, and federal assistance has waned, the hope that many women would reenter the labor force has dwindled.
In response to the recent worker shortage, many employers have reassessed their recruiting practices, increased wages, implemented hiring bonuses, or installed flexibility incentives to entice workers. Despite these enhanced incentives, many industries continue to report labor shortages. In the midst of such a chaotic labor market, the risk to employers of class action litigation under the Equal Pay Act ("EPA"), Title VII of the Civil Rights Act of 1964 ("Title VII"), and state equal pay laws has increased significantly.
Recent Pay Equity Lawsuits
There have been a number of newsworthy pay equity lawsuits in recent years. The pay equity lawsuit by the United States Women's National Team against U.S. Soccer is perhaps the most public example, but there have been several other large pay equity lawsuits filed against high-profile companies in the past few years. For example, judges recently certified class actions against industry-leading technology and software companies that allegedly used evidence of pay history to set salaries for female hires. The plaintiffs allege that this practice, while neutrally applied to all new hires equally regardless of gender, had a disparate negative impact on the female workers' pay compared to their male co-workers performing similar work. Similar cases have followed, including a suit against an industry-leading entertainment company alleging the company maintained a pay secrecy policy that disadvantaged women, and a case against a large logistics company alleging that female workers were relegated to jobs that did not have the same hours and promotional paths as those of their male counterparts.
Originally enacted in 1963 to combat both overt and facially neutral pay discrimination, the EPA requires that men and women in the same workplace be paid equally for jobs that are "substantially equal." "Substantially equal" is a legal term of art that requires an evidentiary record of the work that is actually being performed by women and men in the group targeted in the lawsuit, as opposed to the title or job description bestowed on those employees. "Pay" encompasses anything rendered to the employee, including salary, bonuses, incentives, paid time off, benefits, and other forms of compensation. These cases often involve large potential classes of plaintiffs, and, if the class is certified, they can be very expensive to resolve. The past two years have seen several multi-million-dollar settlements of pay equity cases. These cases are not only difficult to resolve because classes of putative plaintiffs can be large; they are very fact intensive and require detailed discovery across a large segment of the workforce to successfully defend against. Equal Pay and Title VII claims often catch employers by surprise because they rarely involve intentional discrimination, and many large employers struggle to monitor gender pay equity on a company-wide basis. The chaos of the pandemic and its resulting layoffs, followed closely by hiring shortages—particularly among women—have undoubtedly exacerbated unintentional imbalance in gender composition and pay scales across many employers' workforces.
To protect against any unwitting violations of the law, it is crucial that employers understand the requirements of the EPA and its state law analogues, and effectively monitor for any policies or practices that may violate not only the EPA but also state and local statutes enacted to address the gender pay gap. Some of the tools available to employers, such as pay equity studies, must be used carefully in coordination with in-house and outside counsel to ensure that all applicable legal privileges are maintained throughout the process of study. Otherwise, the documents and communications associated with such studies or monitoring can become fodder for plaintiffs' counsel in discovery.
Given their current vulnerability as they manage workforces altered by the pandemic in a shifting labor market, prudent employers are taking steps to monitor their wage practices and ensure compliance with the various laws governing pay equity. Employers are encouraged to contact the authors of this article or any member of Venable's Labor and Employment Practice Group with any questions regarding pay equity.
* The authors of this article thank Alex Clementi, law clerk, for his assistance in its preparation.