Equal Pay Act: Exceptions for Unequal Pay

The Equal Pay Act requires that male and female employees receive equal pay for equal work. However, differences in pay between male and female employees is justified if those differences are based on a bona fide seniority system, merit system or incentive system or any factor other than sex.

Seniority, Merit and Incentive Systems

Once you establish that your pay is less than you male coworker for substantially equal work, your employer has a right to show that the difference in pay is justified.

Under the Equal Pay Act (EPA), an employer is permitted to pay employees differently if the reason for the pay difference is based solely on a bona fide seniority system, merit system or incentive system. To qualify as being bona fide or in good faith, each system:

• Must not be adopted with the intention to discriminate between male and female employees
• Must be based on predetermined criteria that measures seniority, merit or productivity
• Must be communicated to all employees
• Must be consistently and even-handedly applied to all employees
• Must be the basis for any differences in compensation received by male and female employees

A seniority system that determines pay according to the length of service is a justifiable defense for any differences in pay between male and female employees if it is consistently applied to all employees. But, if the seniority system permits a supervisor to arbitrarily authorize exceptions to longevity pay increases, then the system will not be a justification for pay differences based on sex.

A merit system rewards employees for exceptional performance. To be valid, employees must be evaluated at regular intervals according to such predetermined objective criteria as efficiency, accuracy and ability. Employee evaluations may be based on the subjective ratings of supervisors, but the rating system will be closely reviewed to ensure that it meets the requirements of a bona fide system.

An incentive or productivity system rewards employees on the basis of the quality or quantity of production. For example, a word processing clerk might be paid a certain rate for every document produced, or a sales person might be paid a commission rate that is based on that person's total monthly sales.

Factors Other Than Sex

• The factor is related to job requirements or is beneficial to the employer's business
• The factor is reasonable to further the employer's business or to some other employment practice
• The factor is applied to both male and female employees
• The employer and the employee were aware that the factor was or was not be applied in setting the employee's pay
• The factor's application is the reason for the difference in pay

Examples of factors other than sex that employers have used to justify pay differences between male and female employees include:

• Higher compensation to employees with greater education, experience, training and ability
• Higher compensation to employees in a bona fide training program
• Higher compensation to employees who work evening or night shifts
• Pay differences between employees are based on a job classification system
• Higher compensation is based on red-circling, that is, an employee is paid a higher rate for a specific reason such as a disabled employee retains his higher salary while performing lower-paid work because the employee is no longer able to perform the higher-paid work
• Higher compensation to an employee who generates more revenue than lower paid employees
• Higher compensation based on market forces where the difference in pay is based on the higher paid employee's marketplace value or bargaining power
• Lower compensation paid to employees in part-time and temporary jobs