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05. Pay Equity Laws
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05. Pay Equity Laws

Extent of Protection

The U.S. has pay equity laws and regulations on both the federal and state level.

Federal Law 

Equal Pay Act of 1963

The EPA prohibits employers from paying employees less for equal work, because of gender. Specifically, an employer cannot discriminate between employees of the same establishment on the basis of sex, “paying wages to employees at a rate less than the rate at which the employer pays wages to employees of the opposite sex for equal work on jobs, the performance of which requires equal skill, effort and responsibility, and which are performed under similar working conditions”. Wages can include not only hourly or annual pay, but also bonuses, company cars, expense accounts, insurance and other elements of compensation. Further, an employer cannot lower the wages of some employees to make wages equal. The statute of limitations for filing an EPA claim is within two years of the alleged unlawful compensation practice or, in the case of a willful violation, within three years.

Title VII of the Civil Rights Act of 1964

An employee may also file a pay or benefits discrimination claim under Title VII, which prohibits discrimination by covered employers on the basis of race, color, religion, sex or national origin. Unlike the EPA, Title VII does not require the jobs being compared to be substantially equal. Furthermore, in January of 2009, as the first piece of legislation of his administration, President Barak Obama signed into law the Lilly Ledbetter Fair Pay Act of 2009 (“the Ledbetter Act”), amending Title VII. The Ledbetter Act overturned Supreme Court precedent severely restricting the time period for filing unfair pay complaints, establishing that such complaints can be filed within 180 days of a discriminatory paycheck, a period which resets each time a paycheck is issued. Employer practices subject to challenge include managerial decisions about base pay or wages, job classifications, career ladder or other noncompetitive promotion denials, tenure denials and failure to respond to requests for raises.

State Law

Nearly all states also have their own “equal pay acts” mirroring the language of the federal EPA. Since 2016, many states have sought to broaden the pool of comparators to those performing “substantially similar work” or “comparable” work. For example:

  • California, Illinois and New Jersey prohibit disparities among employees performing“substantially similar work” (the same standard is in bills pending in Colorado and Hawaii).
  • Massachusetts prohibits disparities among employees performing “comparable”
  • Oregon and Maryland prohibit disparities among employees performing “work of a comparable character”.
  • Washington prohibits pay disparities among employees who are “similarly employed”.

Further, many of the state laws do not restrict comparison to the same establishment or geographic location. For example, California’s fair pay law allows comparison to employees in other locations or establishments.

In addition, several states specifically prohibit sex-based wage discrimination in their general employment discrimination laws, including for example, Wisconsin and Louisiana, while several other states prohibit wage discrimination based on protected class status in their general employment discrimination laws, including for example, Texas and Utah.

Additional State Efforts to End the Pay Gap

  • Prohibitions on Prior Salary Information

Many cities and states (such as California, Delaware, Hawaii, Massachusetts, New Jersey, Oregon, Puerto Rico, Vermont, New York City, Philadelphia, and San Francisco) have passed laws restricting the collection of prior salary information during the hiring process based on concerns that setting the starting pay rate on the basis of prior salary, may have the effect of perpetuating pay discrimination. For employers, it means there may be a need to revisit long-standing practices around pay-setting decisions, complicated by differing requirements among the state laws. For instance, in some jurisdictions employers cannot ask applicants for prior salary information, but they can use information that is provided voluntarily. In other jurisdictions, employers can ask the question for legitimate purposes such as screening applicants, but cannot rely on the information when setting pay rates.

  • Pay Transparency Laws

Nearly half of the states have also enacted pay transparency laws that prohibit employers from discharging, or taking any other retaliatory action against an employee, for discussing wages or compensation with another employee. Most recently, states such as Washington and New York have enacted pay transparency laws requiring certain employers to list salary ranges for advertised jobs.


An employer who violates the Equal Pay Act is liable to the affected employee, for the amount of wages the employee was underpaid, for liquidated damages equal to 100% of the underpaid wages, as well as for reasonable attorneys’ fees and costs. Further, if the employer has retaliated against an employee for filing a complaint under the EPA, the employee is entitled to equitable relief which may include reinstatement, promotion and the payment of wages lost, as well as an additional equal amount as liquidated damages. The employer must also pay the reasonable attorneys’ fees and costs of the action. However, compensatory and punitive damages are not available.

Under Title VII pay discrimination claims, in addition to the remedies available under the EPA, an employee can also recover compensatory and punitive damages. There are limits however, on the amount of compensatory and punitive damages a person can recover. These limits vary depending on the size of the employer:

  • For employers with 15-100 employees, the limit is $50,000.
  • For employers with 101-200 employees, the limit is $100,000.
  • For employers with 201-500 employees, the limit is $200,000.
  • For employers with more than 500 employees, the limit is $300,000.

Similar remedies exist under state law.


New state and local pay equity laws and the increased attention afforded to equal pay issues, pose significant challenges and unprecedented risks to employers. In addition, the Office of Federal Contract Compliance Program (OFCCP) facilitates enforcement of pay equity violations for federal contractors. Recent litigation and settlements demonstrate the significant exposure in defending these claims:

  • November 2022: a global bank agreed to pay $1.925 million in back wages and interest after discriminating againt 120 female workers in investment services technology positions by paying them less than their male colleagues and 47 Black and 26 Hispanic workers in its technology services group by paying them less than their Asian counterparts.
  • January 2023: a bus manufacturer agreed to pay $44,000 in back wages and interest, and make written job offers to eligible class members, to resolve allegations of race-based hiring discrimination as a result of failing to consider 97 White and 59 Asian applicants for various employment positions.
  • April 2023: a technology solutions provider agreed to pay $435,368 in back pay and interest to affected Black applicants who faced hiring discrimination. The company will also take steps to analyze their selection and hiring practices proactively, conduct an internal analysis to prevent recurrence, and to evaluate its effectiveness.
  • May 2023: an aircraft parts manufacturer agreed to pay $122,000 in back wages and interest to resolve claims it refused to pay female employees the same as their male counterparts and did not act on disability requests.

Other Requirements

Federal Contractor Audit Requirements

All federal contractors who are covered under (federal) affirmative action regulations, must, annually, perform an evaluation of their compensation practices to ensure minorities and women are being fairly treated, locating any pay disparities and determining whether such disparities can be explained by a non-discriminatory reason.

The OFCCP does not dictate a particular method of analysis for meeting this regulatory requirement, but cohort analysis, multiple-regression analysis, and anecdotal comparisons are among the methods typically used, dependent on the size of the company and job type under review. Directive 2018-05 issued by the OFCCP, provides the most up-to-date guidance on how the agency will review compensation practices.

EEOC Pay Data Reports

The EEOC requires employers with at least 100 employees to submit annual reports (EEO-1) that include W-2 pay and hours worked data for their entire workforces nationwide. Armed with the data, the EEOC investigates in detail, the pay practices of those employers whose data suggests indefensible pay disparities.

State Audit Requirements

Some states, such as Massachusetts and Oregon, stipulate that voluntary self-audits can be an affirmative defense to a pay discrimination claim under their equal pay laws. Under the Massachusetts Equal Pay Act, if an employer can demonstrate that it 1) “completed a self-evaluation of its pay practices in good faith” and 2) “can demonstrate that reasonable progress has been made towards eliminating wage differentials based on gender for comparable work.” The audit must be reasonable in detail and scope, in accordance with the employer’s size. It is worth noting, that even if a state does not explicitly include a “self-audit” provision as a viable affirmative defense, such an audit can be helpful in defending a pay discrimination claim, regardless of state.

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