Equal Pay: Considerations for Clubs with Men's and Women's Professional Teams
Equal Pay is a consideration that affects all industries. Employers must ensure that their enterprise is organized and operating in accordance with the Equal Pay Act (EPA). This blog focuses on the professional sport arena - specifically soccer (translation “football”). Now, Equal Pay applies to all employees; however, this article discusses the specific issue of player compensation (on-the-pitch employees).
As explained below, organizations that house a men’s and a women’s professional team must ensure that they are protected against claims for equal pay. This blog breaks down the exposure for some soccer clubs, and steps that can be taken to mitigate the risk. (NOTE: This blog does not discuss the elements of an Equal Pay claim. Click here for the elements.)
Let’s start at the beginning:
Single Team vs. Dual Team Clubs
At this juncture, there are two general types of clubs. There are clubs and owner groups that own one (1) team: a men’s team or a women’s team. For the purposes of this article, these clubs will be called “Single Team Clubs.”
There are also organizations that house both a men’s team and a women’s team. For the purposes of this article, these clubs will be called “Dual-Team Clubs.”
SINGLE TEAM CLUBS
Single Team Clubs are those that only house one team.
These Single Team Clubs must ensure that their back-office and administrative compensation structure is compliant with the EPA. However, as it relates to the Players, these clubs face low exposure to Equal Pay causes of action. A Female Single-Team Club does not have a men’s team as a comparator for salaries.
This blog is geared more towards the Dual-Team Clubs.
DUAL- TEAM CLUBS
There are organizations that own both a men’s team and a women’s team. Each team is often a member of a different league (ie- MLS, NWSL and USL). As explained below, the fact that the players play in different leagues is not enough to combat a Joint Employer determination (equal pay protection).
Prudent Dual-Team Clubs will have a solid understanding of their exposure under the Equal Pay Act.
Dual-Team Clubs and the Equal Pay Risk
Can a Dual - Team Club be sued for an Equal Pay Cause of action? In other words can a player on a women’s team, sue the club for equal pay because she is not getting paid equal to that of a male player within the club?
A Dual-Team Club’s liability under the EPA hinges on this question: WHO IS THE EMPLOYER?
If an organization is deemed a Joint Employer, then the Dual-Team Club faces a risk for exposure under the Equal Pay Act. When assessing Equal Pay Claims, we must look at Title VII and the Fair Labor Standards Act (FLSA). Both statutes protect against unequal pay.
This gets a little tricky, because the FLSA and Title VII each have their own test for Joint Employer. Let’s start with a brief overview of each law:
Fair Labor Standards Act (FLSA)
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…
This is the sacred U.S. mantra: Employers must ensure Equal Pay for Equal Work.
Federal Regulations Link the EPA with Title VII
The federal regulations link the EPA to Title VII. In other words, if a Club violates the EPA, then that club faces exposure under the FLSA and Title VII.
So here we are with two statutes that protect the same thing: Equal Pay for Equal Work.
WHY DOES THIS MATTER?
Let’s take a step back. As we know, the EPA prohibits employers from discriminating against employees based on gender.
What is the next step? We have to establish the definition of employer under each statute. After all, the statute prohibits EMPLOYERS from paying unequally.
HYPOTHETICAL #1:
Take a look at this scenario:
Employer #1: Women’s NWSL Team based in Philadelphia. Separate Entity.
Employer #2: Men’s MLS Team based in Philadelphia. Separate Entity.
A women’s player cannot make the argument that she is getting paid less than a male player because they are separate employers. They are separate clubs.
HYPOTHETICAL #2:
Let’s say there is a club that has an MLS Team and an NWSL team. They are owned by the same ownership group. The NWSL players are making on average $30k less than the players on the MLS team. Can a female player bring a cause of action for equal pay against the club? Can the female player say that her employer is discriminating against her by not paying her what her male contemporaries are making?
Whether a female player has a viable cause of action hinges on whether the Club is deemed a JOINT EMPLOYER.
(NOTE: This blog focuses on the club level. The League (USL, MLS, NWSL) involvement and their status as a joint employer would also have to be assessed.)
JOINT EMPLOYER LIABILITY UNDER THE FLSA & EPA
Since Clubs are liable under the FLSA and Title VII, we must assess the definition of Joint Employer under each statute.
Joint Employer: Title VII
There is not definitive test for Joint Employer under Title VII. Various circuits employ different tests. Prudent clubs will consult with counsel in their jurisdiction.
With that being said, the EEOC outlined the following factors to guide employers. Below are the factors considered when evaluating whether two divisions, entities, or TEAMS are considered a Joint Employer under Title VII. There is no one dispositive factor, rather the situation is assess on a holistic level.
Degree of Interrelation Between Operations
Management Services (check-writing, preparation of policy manuals, contract negotiations, and completion of business licenses)
Share payroll and insurance programs
Share managers and personnel
Share use of office space
Share equipment
Share storage
Operating the entities as a single unit
Degree to Which the Entities Share Common Management
Whether the same individuals manage or supervise the different entities
Whether the entities have common officers
Whether the entities share a Board of Directors
Centralized Control of Labor Relations
Whether there is a centralized source of authority for the development of a personnel policy
Whether one entity maintains personnel records and applications for the employer
Whether the entities share Human Resources
Whether the same person makes employment decisions for both entities
Degree of Common Ownership and Financial Control
Whether the same person(s) own or control the different entities
Whether the same person serves as officers and/or directors of the different entities
Whether one company owns the majority or all of the shares of the other company
What Can Dual-Team Clubs Do?
Prudent Dual-Team Clubs will use the above list as a playbook for professionalizing the women’s side of the house and also protecting the club against any claims under Equal Pay. The best way to combat any claim of Joint Employer is to use the factors provided by the EEOC and the circuits to ensure that the Dual-Team Club is in fact a Separate Employer. Below are some suggestions:
Corporate Structure. Set up a different corporate entity.
Build up the Women’s Club
Hire Executives that only serve the women’s side.
CEO
COO
CLO/General Counsel
General Manager
Medical
Establish a separate physical structure/office for the women’s side of the club.
Ensure the women’s team has its own equipment
Ensure the women’s team has it’s own separate practice pitch.
Create a Board of Directors dedicated only to the Women’s Side of the Club
The Women’s side of the Club promulgates its own policies and enforces same.
JOINT EMPLOYER: FLSA
Now let’s look at the Joint Employer test under the FLSA. The Joint Employer test for the FLSA has a bit of a wacky history. In 2020, the Trump Administration issued regulations that were employer friendly. The Biden Administration rescinded those regulations. As a result, the regulations were removed. To date, there has been no replacement text. However, it is helpful to review the standard that was in place prior to the Trump issued regulations. The Formal Rescission Text from the Department of Labor outlines four (4) scenarios where a Joint Employer could be found:
When there is an arrangement between the employers to share the employee’s services;
Where one employer is acting directly or indirectly in the interest of the other employer (or employers) in relation to the employee;
Where the employers are not completely disassociated with respect to the employees, and they share control of the employee (directly or indirectly).
As of the date of this article, the federal regulation provide little guidance. It follows that employers must then look to the courts for guidance. Prudent Dual-Team Clubs will ascertain the FLSA Joint Employer test of their circuit. Let’s take a look at the case In Re: Enterprise Rent-A-Car Wage & Hour Employment Practices Litigation. In this case, the court reviews the following factors that are “not materially different from [the] sister circuits, and [they reflect] the facts that will generally be most relevant in a joint employment context…”
Authority to hire employees
Authority to fire employees
Authority to promulgate work rules and assignments
Authority to set conditions of employment (including compensation, benefits and hours)
Day-to-Day supervision (including discipline)
Control of employee records (payroll, insurance, taxes and the like)
The above factors are similar to the Title VII factors.
What Can Dual-Team Clubs Do?
Again, Dual-Team Clubs must understand the test that their Circuit Court employs. In an effort to safeguard against a claim for Equal Pay and Joint Employer Status, these club must professionalize the women’s side.
Hire Executives
Hire CEO, COO, CLO, GM, Operations, Technical Staff, Medical Staff that are completely dedicated only to the women’s side.
Draft job descriptions for each role that explicitly indicate that they are dedicated only to the women’s side.
Create a Separate Corporate Entity
Do not Share Executives.
While it may be tempting to share executive functions like Human Resources, and even legal, the sharing of resources could implicate the Joint Employer status.
Create a separate physical office
Create a separate system for employee records
LAST THOUGHTS
Most Dual-Team Clubs house a women’s team and men’s team who are members of different leagues. As discussed above, this fact will help a Dual-Team Club’s argument that they are not a Joint Employer. Prudent Clubs will professionalize both sides of the club (mens’ and women’s).
Let’s play it out in one last scenario….
Dual-Team Equal Pay Hypothetical
REAL FOOTBALL CLUB FC UNITED (“Football Club”) has the following structure:
Ownership Group owns an MLS team, and recently won the bid for an expansion team in the NWSL.
There is a separate corporate entity for the men’s and women’s team, but they share many executive functions:
In an effort to save money, the CEO, COO, and General Counsel will be overseeing the men’s and women’s operations.
The Club Handbook applies to both teams.
The Human Resources Director will also oversee the both teams. All player personnel files are kept in the same office and system.
The Women’s team will share the same training facility, and equipment storage space.
The Medical Staff is shared among the two teams. Trainers are on a rotation and they go to both men’s and women’s games.
Players get medical care in the same facility.
The above facts, when taken as a whole, could lend itself to a Joint Employer determination. Based on the above, a player could have enough facts to carry a cause of action beyond the Motion to Dismiss phase. In other words, a female player could argue the following:
I am performing the same job as the players on the men’s team.
We work for the same employer.
My club is a Joint Employer.
The above scenario arguably is enough for a viable complaint against the club for equal pay.
BOTTOM LINE FOR DUAL-TEAM CLUBS
Raising Salaries May Not Be the Most Efficient Fix
While Dual- Team Clubs could opt simply to raise the salaries of the female players to be equal to that of a male player, that will only be a temporary fix. The Club would be stuck constantly auditing the salaries of the players and thereby constantly be exposed to a risk of litigation.
Professionalizing Each Team is the Lasting Way to Protect the Club and Players
The most efficient way to protect the club against an Equal Pay claim is to separate the teams and ensure that both sides have (1) policies and procedures dedicated to the team, and (2) executives and other professionals completely dedicated to the team. This will confirm the separate employer status, while ensuring that both teams receive the professional structure that they deserve.
Dedicating intellectual capital, physical capital and financial capital to each team will ensure a strong foundation for the entire Club.