Transcript

Host: Hello, and welcome to Prevention and Protection, the United Educators Risk Management Podcast. Today’s podcast, Equal Pay Issues for Educational Employers, is hosted by Hillary Pettegrew, a Senior Risk Management Counsel at United Educators. She is joined by Susan Guerette and Sarah Wieselthier with the law firm Fisher Phillips to discuss important issues about equal pay that are relevant to K-12 schools and higher education institutions. A reminder to listeners that you can find other UE podcasts, as well as UE risk management resources, on our website, www.ue.org. Our podcasts are also available on Apple Podcast and Spotify. Please note that this is a risk management podcast and nothing in this podcast should be considered legal advice. Now, here’s Hillary. 

Hillary Pettegrew: Hello, and I’m happy to introduce our guest speakers, Susan Guerette and Sarah Wieselthier, who are both attorneys with Fisher Phillips. Susan is a partner in the Philadelphia office, where she is a member of the firm’s Education Practice Group representing private educational institutions in employee, student, and board issues. Susan works with her school, college, and university clients on a wide range of labor and employment matters, including defending claims of discrimination. And she counsels her clients, including educational institutions, about compliance with federal and state equal pay act laws. Susan, UE is delighted to have you share your expertise today. 

Susan Guerette: Thanks Hillary. We’re happy to talk to you today. 

Pettegrew: And Sarah is of counsel in the firm’s New Jersey office and has extensive experience representing clients in labor and employment matters, including pay equity and wage-and-hour disputes under federal law as well as New York and New Jersey law. She also presents on these issues both nationally and locally. Sarah previously worked for another law firm representing public school districts in education and labor and employment matters. Sarah, thanks very much for joining our podcast. 

Sarah Wieselthier: Thanks for having me. 

Pettegrew: Now, in recent years, UE has seen an increasing number of pay equity claims against our members, and they can be very costly. Defined broadly, pay equity means providing comparable pay to employees who have similar job functions regardless of their gender or other protected status. Doing so is a legal requirement, and it applies to K-12 schools and higher education institutions. Note that during this podcast, we’ll sometimes use the term ”schools” as shorthand for both types of institutions unless we make a specific distinction. So I described pay equity generally. Sarah, could you elaborate on its definition for legal purposes? 

Wieselthier: Of course. Under the federal Equal Pay Act, when we talk about pay equity, we’re looking at employees who are providing the same or substantially similar work. And the requirement is that if employees are performing the same or substantially similar work that they should be provided with similar or equal compensation. So if you have two employees that are doing the same job but they are being paid differently, it needs to be explained by what we call a legitimate business factor or legitimate explanation under the law. So if we don’t have a legitimate business factor – let’s say somebody’s experience or their education level or their background -- that can justify a differential in pay, then we need to fix that problem because if there’s a discrepancy and it falls along gender lines, that would be an issue under the federal law. And certain state laws also recognize other protected categories. So if there’s a pay disparity, it’s really important for the school to fix the inequity in order to be in compliance with the federal and local equal pay laws. 

Pettegrew: So Susan, which laws in this area do apply to schools, colleges, and universities? 

Guerette: Yeah, there are two federal laws. 

The Equal Pay Act (the EPA), which requires that men and women in the same workplace receive equal pay for equal work. Under this law, an employee does not have to prove that the employer intended to discriminate. A plaintiff makes a prima facie case, which simply means that one party’s evidence is enough to establish their claims unless the other party rebuts it by showing three things: The employer pays lower wages to employees of the opposite sex in the same workplace, the employees perform substantially equal work, and the jobs are performed under similar working conditions.  

In addition to Equal Pay Act, Title VII also prohibits employment discrimination on the basis of various protected categories, including sex.  

Even more importantly, though, there are now state and other laws such as municipal ordinances that have even more restrictive pay equity provisions. Schools should really consult with their counsel for details as to the particular state they’re in because the state laws differ from the federal EPA in important ways, and those ways usually benefit the employees and give them greater claims under them than the federal laws. 

So for example, one major difference is that while the federal law prohibits the pay disparities on the basis of sex, some states also prohibit pay disparities based on additional protected categories such as race or ethnicity. And others ban them on the basis of any category recognized by the state’s human rights or anti-discrimination laws. So they can be much broader than the federal laws. 

Pettegrew: Thanks, Susan. And I’ll just note here that Fisher Phillips has created three interactive maps of state laws relating to different aspects of pay equity. So one map shows the various bases on which the states prohibit paid disparities, the issue Susan just mentioned. The second map identifies states that prohibit salary history inquiries, and the third shows which states require wage disclosures to job applicants or in their job postings or both. And those two issues will come up a bit later in the podcast. Audience members will find a link to the three maps on UE’s podcast landing page or on the firm’s website, www.fisherphillips.com, and search the term “pay equity”.  

Susan, what does compensation mean for purposes of the equal pay laws? 

Guerette: The statutory language is interpreted very broadly. So equal pay means not just an employee’s salary but their total compensation package. This includes value of health care benefits, life and other insurance benefits, retirement plans, other perks like expense accounts and car allowances. And in the case of schools, that can also include housing or other stipends. So the school needs to include those as well. So when schools are assessing what they’re paying different employees, they need to look for all types of compensation and include them in their analysis. 

Pettegrew: Thanks. Sarah, let’s continue digging into some of the terminology here. What does equal or substantially similar work mean? 

Wieselthier: So when we talk about equal or substantially similar work, we’re looking at what is the skill, effort, and responsibility that’s needed for the positions that are being compared? So for each job, you’re going to look at each of those categories to evaluate and assess whether or not they are comparable. 

 So when we talk about skill, we’re looking at the experience, training, education, and/or ability of a person to perform the job duties.  

When it comes to effort, we’re looking at the amount of physical or mental exertion needed to perform a job. 

And responsibility looks to the degree of discretion or accountability that’s involved in performing the job, what duties are regularly required to perform the job, how much supervision does the person receive, does this employee supervise others, and just generally to what degree the employee’s involved in decision-making. 

It’s important to understand that equal or substantially similar work is not determined by a job title or job description. We all know that job descriptions aren’t always up to date and don’t truly encompass what a person is doing day to day. We need to look specifically at the work that somebody actually performs. And that might mean that in a university, for example, you may have two different departments and you may have secretaries or assistants in those two different departments. They should likely be compared and viewed similarly even though they’re in separate departments because the duties and responsibilities and the effort needed for the job may be similar.  

Certain state laws use different language in terms of what the comparison is. So you might see terminology like substantially similar or comparable work. These are more expansive than the Equal Pay Act federal standards – so more beneficial to employees. But generally speaking, these are the factors that we’re looking at when we’re comparing different positions to see whether or not they are substantially similar for equal pay purposes. 

Pettegrew: Susan, how should a school analyze whether employees are performing equal or substantially similar work for purposes of the pay equity laws? 

Guerette: Unfortunately there are no bright line or blanket rules, and jobs can vary at different schools. So as Sarah said, schools should consider the skill, effort, and responsibility for each job. So for example, with teachers in a K-12 setting, teaching first grade vs. higher grades may not be substantially similar and may justify a pay difference. At a college or university, faculty teaching in different departments or teaching undergrad vs. graduate students may or may not be performing substantially similar work. Again, in doing a pay equity analysis, the school would have to look at what skill, effort, and responsibility is involved with each position. 

Other situations include jobs like coaching, so a school could conclude that they are the same, but different sports may have different demands and may support a difference in pay. As Sarah mentioned too, with secretarial and support staff and assistants, for example, to the Head of School vs. a support person in the Math department may or may not be performing substantially similar work. And with other areas like maintenance, custodial services, food services, there can be different levels of physical effort that could support a difference in pay. So again, whether it’s equal or substantially similar work will really depend on the specific facts and circumstances. 

Pettegrew: Can schools legally justify pay disparities? 

Guerette: Yes. So assuming that it’s equal or substantially equal work, you’ve done that first assessment, the Equal Pay Act does allow unequal pay if it’s based on one of these four factors: A seniority system, a merit system, a system that measures earnings based on quality of production, or a differential based on any factor other than sex.  

State pay equity laws are generally more restrictive from the employer’s perspective and the trend is to replace the fourth prong, any factor other than sex with a different test that’s more difficult to meet, which is a bona fide factor other than sex. And a bona fide factor must not be based on or derived from a sex-based compensation differential and must be job-related and consistent with business necessity. And another aspect to this is that the school as the employer always has to prove that the pay disparity is based on a specific justification or exception under either federal or state law. 

Pettegrew: Sarah, what about salary history? Is that a permissible basis for a pay disparity under federal or state law? 

Wieselthier: Probably not. The issue is unresolved under federal law. There’s currently a split among the federal circuit courts whether salary history can be a legitimate reason for a pay disparity under the Equal Pay Act, essentially falling under that catchall that Susan mentioned: a differential based on any factor other than sex. But instead you can ask about a candidate’s salary expectations, and that’s for a few reasons. One is that more and more states are prohibiting questions about an applicant’s salary history. As you mentioned, our firm created three state law maps and one of them shows specifically which states prohibit salary history inquiries. So it’s really important, since the pay equity laws are constantly changing, to keep on top of whether or not the state where your school is located has a salary history ban. More likely than not, it probably does. And if it doesn’t, it probably should still be a question that you’re removing from your job applications and not asking about during your interviews. 

It’s also important for employers to recognize that under federal or state law, they can’t require employees to keep their own salary information confidential, which means you can’t punish employees for sharing information about their compensation with each other. And all of this comes down to the fact that we don’t want to perpetuate a pay inequity that may have been put in place earlier on in somebody’s career by basing their future compensation on that former pay. So it’s really important to consider other factors that we know are considered lawful and legitimate under the federal and state law when we’re setting pay. 

Pettegrew: What types of damages are potentially available to employees under the federal Equal Pay Act? 

Wieselthier: First, I want to reiterate Susan’s point earlier, which is that under the equal pay laws, in contrast to most discrimination laws, a plaintiff does not have to prove an employer intended to discriminate to succeed. All they need to show is that a pay disparity exists, and if the employer can’t justify it based on one of the factors we discussed, they’re going to prevail.  

Under the federal Equal Pay Act, if an employee is successful in their claim, they are entitled to recover their unpaid wages, which would be the differential in pay between themselves and the similarly situated employee who is receiving the higher pay. They could be entitled to 100% of the unpaid wages as liquidated damages. So essentially overall they would receive double what the pay differential was, and they could also be entitled to attorney’s fees and costs, which could be substantial, especially if there’s multiple employees involved and you are involved in a class or collective action litigation. 

Now under the federal law, employees can recover wages going back two years, or three years if the employer’s violation was considered willful.  

Now many state laws have even more expansive damages. For example, in addition to unpaid wages, there may be higher liquidated damages, either 200 or 300% of unpaid wages vs. 100% under the federal law. And attorney’s fees and costs, of course, are always there. Some states also have longer statute of limitations, which means that employees can go back beyond the two or three years that are recognized under the federal Equal Pay Act. As far back as six years: in New Jersey, for example, where I practice, the statute of limitations is double. So that would permit employees to recover even more unpaid wages if there was a pay differential. 

Pettegrew: Sarah, apart from potential damages and certain other differences we’ve discussed between the federal Equal Pay Act and some state laws, are there other trending issues you’re seeing in the states? 

Wieselthier: The hottest pay equity trend that we’ve seen over the last few months is the growth in pay transparency laws. These are laws that are being enacted in various states throughout the country, which essentially require job applicants to be informed of certain information about the salary or anticipated salary for the position.  

Now the details vary depending on the state in terms of exactly what information needs to be provided and at what point in the application process. But generally speaking, these laws are requiring job posts to provide a salary range to job applicants. You may also be required to provide some broader information about what benefits are available, like dental, medical benefits, 401k, things of that nature. So it’s really important to be on top of whether or not a state requires certain pay transparency because that is really evolving and we’re seeing a lot of movement. There’s a lot of proposed legislation in certain states that are picking up steam. 

So it’s important to keep on top of that and we do have a map for that as well that we try to keep up to date. That’s available on the Fisher Phillips website, which has some of the details on a state-by-state basis as to what the specific pay transparency requirements are. It’s also important to keep in mind that some of these laws have expansions beyond the specific state. So if for some reason your school has positions that could be performed remotely, it’s important to be mindful of what the implications are of that because certain remote positions, because they theoretically could be performed in state X, may be subject to state X’s pay transparency laws. So it can be a little bit confusing, and it’s really important as you start to advertise for new positions that you check as to what the relevant pay transparency laws are so that your job postings are compliant. 

Pettegrew: Susan, how would you recommend a school respond if an employee complains about an alleged pay disparity? 

Guerette: So in terms of responding to an individual employee who makes a complaint, first, the school should take the complaint seriously and look closely at the relevant documentation for both the complaining employee and the employee or employees that the employee is comparing themselves to. As Sarah discussed, this means comparing the work that the employees are actually doing, regardless of their job titles. If the school finds that they are performing comparable work and there’s a pay differential, they should determine whether they can justify it by one of the specific factors allowed under federal or state law.  

If the school finds that a disparity cannot be legally justified, they really have only one option, which is to increase the pay of the employee who is disadvantaged and underpaid. Neither federal nor state law allows the employer to reduce an employee’s compensation to correct the disparity. It’s also critical in this type of situation not to retaliate against an employee who complains about or questions their compensation. Both federal and state laws prohibit retaliation, and retaliation can sometimes be easier to prove than the underlying complaint. So schools should make sure that their supervisors are trained and understand this issue.  

If you get an employee complaint, though, you should also consider conducting a pay equity audit to see if there are other pay equity problems at the school. Audits are complicated, so we’re not going to get into all the details today, but essentially they allow a school, an employer, to do a few things. First, they identify pay disparities at the school so the school can kind of get a handle on whether it has issues. Then, if disparities are found, the school would want to determine if it has a lawful explanation for them. If there’s no lawful explanation for the differences, the school would want to take steps to correct the disparities. Schools can also use an audit as an opportunity to identify and correct weaknesses in their systems to prevent against future pay disparity claims and future litigation. 

We do recommend that schools work with an attorney on an audit from the beginning so that there’s an argument that the audit is privileged. If schools don’t do that [and] then there’s litigation, the plaintiff is likely going to be able to argue that copies of all the work the school has done, such as its statistics and analyses, is discoverable. So we do recommend that you work with an attorney so we have that argument that it’s privileged. And keep in mind if an audit uncovers pay disparities that can’t be legally justified, the only remedy is to increase the compensation. So we need to have that in mind as we do the audit. And finally, although an audit can be expensive, it’s likely to be considerably less costly than litigation and paying past wages, as Sarah mentioned. 

Pettegrew: Thanks, Susan. Although these general principles of course apply to both higher education and K-12 schools, are there any particular issues for independent schools in the equal pay area? 

Guerette: Yeah, so one of the main issues that I’ve seen while working with schools is their messaging. And schools are under a lot of pressure to be transparent, to communicate with their communities, and this can lead them to share too much with employees. So we have seen a number of schools announce that they’re doing pay equity studies or compensation surveys, and although their desire to be transparent is commendable, if it turns out that their pay equity audit reveals that they have compensation disparities, they’re going to be on the spot to correct them. So because of potential legal liability, we recommend that schools be careful about what they share with employees, try to keep the issues confidential. Then at the end of the audit they can assess their exposure and try to take steps to correct their issues. Again, the only true remedy is to raise salaries, but depending on the school’s budget, they might not be able to do that right away. 

And also my experience, independent schools sometimes fail to retain documentation needed to justify pay differentials. So for example, if a female employee complains that a male employee with the same job as hired at a higher salary, the school should have written records showing why that was the case. So for example, maybe the male employee had an advanced degree, specialized knowledge, or was given a secondary role when he was hired. But if the school has not kept records of that reason, it can be much more difficult later on to figure out and justify why that male employee was paid a higher salary. 

Pettegrew: Sarah, what do you think are the primary risks for an educational institution that does not pay its employees equitably? 

Wieselthier: Of course, one of the biggest risks are the legal claims, right? As we discussed, the financial exposure for a school can be significant if there is an equal pay claim, especially if you’re in a state that has a more expansive statute of limitations or provides for enhanced liquidated damages. And potential liability can also go really through the roof when you think about what the attorney’s fees could be, which oftentimes a plaintiff’s attorney’s fees may be in the low six figures to litigate a matter through a trial. And if for some reason you had a class or collective action, which would mean that all of your teachers in a certain position all came together to litigate this dispute collectively, that really just adds up. So from a dollars and cents perspective, it can be really expensive if there is a pay inequity and there’s related litigation. 

And another risk if there’s litigation would, of course, mean publicity. If a lawsuit is filed, that is public information. It’s often newsworthy, especially if you are a larger or more prominent educational institution, and that has impacts that are far-reaching. If there is publicity and concerns about the school not paying employees equitably, that may lead to difficulty in retaining your current employees or poor morale among those who stay. It may also significantly impact your recruitment efforts, and just overall damage to the school’s reputation may make it more challenging to recruit and retain your students as well. Both K-12 schools and higher education institutions really value their reputations and depend on them to attract high-performing employees as well as students. And I think the reputational aspect can be more critical for schools than for many employers in a similar situation given the circumstances. 

Pettegrew: Well, before we wrap up, what are the top few takeaways you would each like our audience to keep in mind? Let’s start with Susan first and then Sarah. 

Guerette: Again, K-12 schools in particular need to be very careful with their messaging and shouldn’t announce these audits to their broader school communities. At the same time, I do recommend informing the school’s board chair of the fact that the school is working on an audit. So either the Head of School or the President of the university should let the board chair know that that’s being done and then later provide the results, as these can involve legal risk, but the board also should be prepared and may need to be involved in the steps needed to remedy pay disparities such as increasing the budget for compensation.  

And all schools, like employers in general, should keep abreast of changes in their state laws. So for example, in many of the states that currently only restrict pay differences based on sex, we’re likely to see an expansion of grounds on which pay discrimination is prohibited to include other protected categories. So it’s really important that they stay on top of the changes in their state. 

Pettegrew: And Sarah, what would your takeaways be? 

Wieselthier: It’s really important to be proactive when it comes to these pay equity issues. Oftentimes, looking, doing a pay equity analysis or audit is at the end of an ever-growing to-do list. But given the momentum in the law and the publicity generally as a society that we’ve been giving to these pay disparities, it’s not going to go away and turning a blind eye to it may only make the situation worse. I agree with Susan that schools need to be aware of the pay equity laws in their jurisdictions.  

But it’s really important to look at what you’re doing in terms of compensation. Do an audit, not just once. Do them periodically.  If you can’t do it annually, every few years, you want to make sure that you know what’s going on, whether there’s any issues. And if there’s any issues, you want to be able to address it because as time moves on, you’re going to have turnover, you’re going to have different recruitment efforts, and you want to make sure when you’re onboarding new employees and you’re setting their salary, that it’s not affecting the overall equilibrium, even if you’ve made some changes in the past to make sure people are being paid equitably. It’s just really important to get ahead of these issues by conducting an audit and making sure that you remain current on what the legal landscape is so that you can continue to be in compliance with the law and hopefully avoid any lawsuits or bad publicity or press or anything that might come with any pay disparities coming to light. 

Pettegrew: Thank you both. And that brings us to the end of today’s podcast. As a reminder, audience members can find the three interactive maps that Fisher Phillips created regarding state laws on pay equity on UE’s podcast landing page or on the firm’s own website, which again is www.fisherphillips.com. I’d like to thank our audience members for listening and give another very special thanks to Susan and Sarah for sharing their knowledge and expertise on this critical topic. 

Host: From United Educators Insurance, this is the Prevention and Protection Podcast. For additional episodes and other risk management resources, please visit our website at www.ue.org.