Labor & Employment News Alert
Recent Holding From Pennsylvania Federal Court Reminds Employers To Examine Pay Equity Issues
November 5, 2018
By: David R. Stone
The United States District Court for the Middle District of Pennsylvania recently granted conditional certification for a collective action for two female employees of Five Guys who claim violations of the Equal Pay Act, a federal law which prohibits discrimination in the payment of wages to employees performing jobs that require “equal skill, effort, and responsibility.” 29 U.S.C. § 206(d). The case raises interesting pay equity issues, and employers should take note of their own compensation policies with respect to pay equity.
The Plaintiffs in this case, Finefrock v. Five Guys Operations, LLC, No. 1:16-cv-1221 (M.D. Pa. Sept. 28, 2018), are two former female assistant general managers and general managers of different Five Guys stores in Pennsylvania. They claim to have been paid less than other male managers, despite performing similar jobs under similar working conditions. The plaintiffs moved for certification as a conditional collective action under 29 U.S.C. § 216(b).
Specifically, Plaintiffs presented evidence that the positions of assistant general manager and general manager are essentially the same at each Five Guys location. Plaintiffs presented job descriptions, employee handbooks, and testimony of Five Guys management indicating that the jobs required the same skill, responsibility, and effort.
Notably, Five Guys admitted that it had no written policies, procedures, or guidelines for determining initial salaries or raises, or pay scales for each position. Five Guys instead contends that it need not pay its assistant general managers and general managers at different stores the same wages because they each constitute different “establishments,” and thus should not be compared for purposes of the Equal Pay Act.
Though this holding does not impose liability on Five Guys, and it remains to be seen whether Plaintiffs’ claims will ultimately succeed, the case should prompt employers to consider an examination of their pay equity policies. A pay equity audit can be a helpful tool to identify potential issues and avoid litigation.
Might a pay equity audit be in order?
The Finefrock case raises several interesting issues regarding pay equity, and it provides an example for companies that may want to review their pay equity policies. Situations like that at issue in the Finefrock case—where an employer admittedly has no policies in place regarding salary determinations—exemplify how a well-crated policy can prevent pay disparity issues from occurring.
Conducting a pay equity audit entails more than simply examining compensation packages among a company’s employees. It should also include examination of the policies, guidelines, and procedures used to determine salaries. It should include examination of management’s communications with employees and their ability to articulate the reasons for making compensation decisions. An audit should also examine the level of discretion given to managers with respect to salary decisions.
Considering these issues necessarily involves a comparison of the job duties performed and compliance with applicable pay equity regulations. Employers must also consider state and local regulations. Many states and cities have recently enacted pay equity laws that are even more stringent than the Equal Pay Act. Employers in such jurisdictions must be aware of those mandates and determine compliance with those laws.
Can an employer inquire about prior salary?
Finefrock involves another important pay equity issue—whether it is permissible to inquire about a prospective employee’s prior salary as a basis for setting their starting salary. In Finefrock, Five Guys explained that when it took over a franchise from a franchisee, it retained the assistant general manager and general manager at the same salary. However, the general trend is to make the practice of inquiring about prior salary illegal—and this has been the focus of much recent state and city regulation across the country.
Most recently, the Ninth Circuit held that “prior salary alone or in combination with other factors cannot justify a wage differential.” Rizo v. Yovino, 887 F.3d 453 (9th Cir. 2018). The issue may be decided soon by the United States Supreme Court which will decide in the coming months whether to grant certiorari on the issue.