Equal Pay for Equal Work- What is "Pay?"

This is the second blog in a three-part series on Equal Pay. The first blog discussed who was covered under the Equal Pay Act (EPA). This blog focuses on what constitutes “pay.” Some may think that as long as everyone is paid the same hourly wage salary, then that is enough. It is not. The statute and the regulations are crystal clear as to what constitutes “pay.” Employers must consider, among other things, wages, benefits, bonuses, deferred compensation, the timing of the pay, and fringe benefits.

The Statute…

Section 206(d)(1) of the Fair Labor Standards Act is the Equal Pay Act, which reads as follows:

No employer …shall discriminate…on the basis of sex by paying wages to employees in such establishment at a rate less than the rate at which [they] pay wages to employees of the opposite sex in such establishment for equal work on jobs the performance of which requires equal skill, effort, and responsibility, and which are performed under similar working conditions…

BOTTOM LINE: An employer cannot pay an employee of one sex, less than another employee of a different sex, for work that requires equal:

  • skill

  • effort

  • responsibility, and

  • performed under the same working conditions.

This blog focuses on the “Pay” part. When assessing whether an employee is paid less than another, what is evaluated? Read on…

WHAT IS CONSIDERED WHEN ASSESSING “PAY” (wages)

It is crucial for employers to understand what compensation means under the law. The federal regulations set it out. Generally wages includes all payments made to an employee as renumeration for employment. The regulations are clear that this includes all types of compensation irrespective of when it is paid, or what it is called.

WHEN

Employers must be aware of this important factor. All compensation is considered. It is not enough that the employees are paid the same in real time, if one employee receives a better deferred compensation plan, or bonus. Companies must look at the wages in real time, and also any future compensation owed to employees who are performing “equal work". (The next blog will explain the definition of “equal work.”)

WHAT IT IS CALLED

The law is absolutely clear, that “pay” does not just mean money. According to the regulations, wages includes all forms for compensation irrespective of whether they are called:

  • wages

  • salary

  • profit sharing

  • expense account

  • monthly minimum

  • bonus

  • uniform cleaning allowance

  • hotel accommodations

  • use of company car

  • gasoline allowance

  • vacation

  • holiday pay

  • premium payment for Sat/Sun/holidays (or any other premium payment)

  • Fringe Benefits (medical, hospital, accident, life insurance, retirement benefits, profit sharing, bonus plans, leave “and other such concepts.”)

MEDIUM OF EXCHANGE

The wages must be paid in the same medium of exchange. The regulations are also clear that it is not enough to attempt to equalize. Employers are “prohibited from paying higher hourly rates to all employees of one sex and then attempting to equalize the differential by periodically paying employees of the opposite sex a bonus.”

EXAMPLE: There are two employees of different sexes performing equal work (again the next blog will define and explain “equal work.”)

  • Employee A receives a lower base salary, and a higher bonus.

  • Employee B receives a higher base salary and a lower bonus.

  • Both employees receive the same total compensation.

This scenario is violative of the Equal Pay Act. Under the law, the employer is seen as “attempting to equalize the differential by periodically paying employees of the opposite [other] sex a bonus.”

WHAT DOES THIS MEAN?

Merely looking at the final compensation numbers is not enough. Employers must look at all compensation (as defined above) and when it is paid. When ensuring compliance with the EPA, employers must look at the entire picture.

Susie Cirilli