This article will help employers, attorneys and investigators understand some of the basic differences between California and federal law in this area, including recent developments to be aware of.

The law around equal pay claims may seem complicated, with multiple federal and state nondiscrimination statutes that can apply to the same conduct. This article will help employers, attorneys and investigators understand some of the basic differences between California and federal law in this area, including recent developments to be aware of.

Comparing the Statutes

Discrimination in pay is a type of employment discrimination, and thus is covered by state and federal nondiscrimination laws like Title VII and California’s Fair Employment and Housing Act (FEHA). But there are more specific statutes in both federal and state law that also address this issue, both (confusingly) called the Equal Pay Act (EPA). One difference between EPA claims and regular discrimination claims is that equal pay laws generally provide for strict liability: that is, there is no requirement that an employee prove discriminatory intent. A failure to provide equal pay, without an adequate justification, is a violation of the law.

The federal EPA, 29 U.S.C. § 206(d), was adopted in 1963, one year before the enactment of Title VII of the 1964 Civil Rights Act that outlawed employment discrimination more generally. The federal EPA only covers pay discrimination based on gender, not other protected categories, but it applies to both men and women. The statute says that an employee cannot be paid less than an employee of a different sex for performing “equal work” on a job that requires “equal skill, effort, and responsibility.” The statute includes four exceptions, for differences that are based in (1) a seniority system, (2) a merit system, (3) a production-measuring system, or (4) “a differential based on any other factor other than sex.”

California’s EPA was enacted earlier, in 1949. It was virtually identical to the federal EPA until amendments adopted in 2015 substantially broadened the groups protected by the law and narrowed the justifications available to employers. The current statute, Cal. Labor Code § 1197.5, applies to both gender and race/ethnicity. Instead of “equal” work, the California EPA covers employees whose work is “substantially similar.” The first three statutory exceptions that can account for unequal pay are the same as in the federal law, but the fourth exception is narrower. In California, this must be a “bona fide factor other than sex, such as education, training, or experience,” which is job-related and required by business necessity.

Despite their apparent differences, court decisions have interpreted the federal and state EPAs in similar ways. Generally speaking, both statutes involve the same two-step analysis: First, are there two employees of different genders (or races) who are paid differently for performing the same kind of work? Second, is that difference justified by one of the permissible factors? If not, the employer is liable.

Step One: Identifying the Right Comparators

The first inquiry under either statute is whether the identified comparator—the employee of a different sex or ethnicity who is paid more than the complainant—is truly equivalent. While these cases often involve looking at groups of employees and statistical averages within each group, it is important to note that the law also applies to individual employees. A recent California case, Allen v. Staples (2022), was brought by a female sales manager who was paid less than a male employee in the same position. The employer pointed to evidence that on average, it paid female employees more than male employees, and the lower court granted summary judgment on that basis. The Court of Appeal reversed, holding that only a single comparator is needed, citing authorities under the federal EPA.

The Ninth Circuit also looked at the question of what constitutes sufficiently similar work in a 2021 decision, Freyd v. University of Oregon. While that decision involved the federal EPA, the Ninth Circuit has read the statute’s requirement of “equal” work broadly, holding that the comparators only need to perform “substantially” equal work. In that case, involving university professors, the court held that the comparators met that standard even though they performed different research, led different centers, and taught different classes. A California trial court in 2021 also used a broad understanding of this standard to certify a class of thousands of female employees in Ellis v. Google, noting that the employees do not need to have exactly the same duties to meet the first element under the state EPA.

Step Two: Factors That Can Justify a Pay Disparity

One point of disagreement among federal circuit courts is whether the factor used to justify a pay disparity must be job-related. In 1974, in one of the earliest decision applying the federal EPA, Corning Glass Works v. Brennan, the U.S. Supreme Court held that market forces are not a “factor other than sex,” rejecting the employer’s argument that it paid men more because men refused to work for the low wages the company offered women. Following this logic, the Ninth Circuit held in an en banc ruling in 2020, Rizo v. Yovino, that an employee’s prior salary is also not a “factor other than sex” under the federal EPA, because that could perpetuate pay inequity indefinitely. This recognition is codified explicitly in California Labor Code Section 432.3, which prohibits employers from relying on salary history in setting pay.

Other federal courts of appeal have come out differently on that question, however. In October 2023, in Eisenhauer v. Culinary Institute of America, the Second Circuit rejected the Ninth Circuit’s approach. That case involved a sex-neutral compensation plan set forth in a collective bargaining agreement that locked in different pay rates for employees as of the time of hire, even if the passage of time eroded any differences in their qualifications. While the Ninth Circuit ruled in Rizo that the “factor other than sex” must be job-related, the Second Circuit concluded this interpretation was not supported by the plain text of the statute. It held that the compensation plan—even if not job-related—was a valid justification for the pay differential. In reality, however, this distinction may be less significant than it appears, because the factors in Eisenhauer were arguably job-related, as they were based on a meaningful difference in experience when the employees were hired.

Tips for Investigating Equal Pay Claims

Based on the case law and statutes discussed above, California attorneys and employers evaluating equal pay complaints should make sure to follow these pointers:

• Consider the right comparators. Remember that an employee could prevail by either identifying statistical evidence that a group of employees of a different gender or race are paid more, or by pointing to a single employee of a different gender or race who is paid more for doing substantially similar work.
• Apply the right factors. In the Ninth Circuit or in states with equal pay laws like California’s, factors that can justify a disparity in pay must be related to the job in question, and prior salary alone can never qualify as a permissible factor.
• Remember the two-step analysis. Since equal pay laws have no intent requirement, there is no burden-shifting back to the employee to prove pretext, as courts may require under other discrimination laws. Rather, after the employee makes out a prima facie case that there is a pay disparity between employees who do substantially similar work, the employer has the burden to prove that the disparity is justified. If the employer cannot show that by a preponderance of the evidence, the employee will prevail.

To read the original version of “When Is Unequal Pay Not OK? Comparing Federal and State Equal Pay Laws,” please visit The Recorder website (subscription required).

Reprinted with permission from the February 28, 2024, edition of The Recorder ^© 2024 ALM Global Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-256-2472 or asset-and-logo-licensing@alm.com.