A federal court held recently that a pay disparity between a female employee and her male successor was not justified as a matter of law by the company’s claim that he was better able to negotiate over salary. Dreves v. Hudson Group (HG) Retail, LLC, No. 2:11-cv-4 (D. Vt. June 12, 2013).

Plaintiff, a general manager of Hudson stores at Burlington International Airport, alleged Hudson violated the Federal Pay Act when it terminated her and paid a hire salary to her male successor. According to Hudson, the higher salary was justified because: (1) after Hudson’s initial offer, the male successor negotiated a higher salary; (2) the male successor had over six years of management experience at Hudson; (3) the cost of living in Burlington, Vermont was greater than his previous location; and (4) the male successor needed to be induced to move his family to the area. Plaintiff moved for summary judgment on her claims, which the court granted.

The Court held that, when a plaintiff has established a prima facie case of an equal pay act violation, a Defendant’s factor-other-than-sex defense cannot be grounded on the male successor’s alleged ability to negotiate a higher salary.  Nor may it be based on a company’s alleged need to induce the successor to agree to employment, unless the employer can show the inducement is based on a valid business purpose. For example, the employer can offer an inducement to a potential employee who has better qualifications or greater experience than the claimant. Here, the court concluded that Hudson lacked a valid defense as it did not meet its burden of showing that the inducement to the male successor based on his family circumstances was related to any unique characteristic of his position, his qualifications, experience or abilities, or any exigent circumstances associated with Hudson’s operations.

The decision highlights the difficulties retailers can face in attracting talent or making a decision regarding compensation of salaried employees. Companies must connect compensation decisions, including initial offers, starting salaries and raises to valid business purposes to avoid potential liability under federal equal pay requirements.