A recent and important pay equity case, Drum V Leeson Electric Corp., sounds a cautionary note to employers and appears to signal pretty definitively that there are some excuses that will not stand in defending gender pay differences.
Specifically, employers may not rely on superior negotiating skills - or the market - as a rationale for pay disparities between men and women doing the same job.
From the Littler Blog:
This case provides a cautionary tale to employers as they set salaries for new and existing employees. When engaging in the hiring and salary negotiation process, employers must be mindful of the salary history of those employees who hold or have held the same job. It is not enough that one employee is a better negotiator than another. Employers must be able to point to skills, experience, or other factors not related to gender that justify a salary differential. An employer that wants to hire a similarly qualified employee for a position at a higher rate of pay than his or her predecessor or than current employees in the same position, may need to make retrospective and prospective salary adjustments for other employees.
At the same time, certain market-driven differences may be acceptable in specific situations. To be acceptable, however, an employer needs to rely on more than a broad "the market made me do it" defense. It must instead look to distinctions between the candidates (other than gender) to justify the market impact. Those could include greater years of experience, more job knowledge, adeptness in a particular skill needed by the employer and other similar factors. The market also can be used to differentiate one position from another, but if the positions are the same, the market defense is less useful, if useful at all.
Consider yourselves - and your managers - warned.
(Hat tip to Daniel Schwartz of the Connecticut Employers Law Blog for the tweet on this case and link!)
Ann Bares is the Editor of Compensation Café, Author of Compensation Force and Managing Partner of Altura Consulting Group LLC, where she provides compensation consulting services to a wide range of client organizations. She earned her M.B.A. at Northwestern University’s Kellogg School, enjoys reading in her spare time and is currently trying to decide whether to follow her daughter to China this summer. Follow her on Twitter at @annbares.
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