Academic journal article Journal of Corporation Law

Defending the "Acceptable Business Reason" Requirement of the Equal Pay Act: A Response to the Challenges of Wernsing V. Department of Human Services

Academic journal article Journal of Corporation Law

Defending the "Acceptable Business Reason" Requirement of the Equal Pay Act: A Response to the Challenges of Wernsing V. Department of Human Services

Article excerpt


Historically, female employees have earned less than male employees for substantially similar work.1 This trend, known as the gender wage gap,2 continues today and is demonstrable in almost every sector.3 Modern social scientists posit competing theories about why it exists. Under choice theory, it is suggested that women consistently earn less because they make different choices in their careers.4 For example, female employees are more likely to exit the workforce in order to become full-time parents than male employees. Thus, the theory makes the normative claim that male employees earn more on average than female employees because males more frequently make choices that are more conducive to career advancement.5 Another theory, the discrimination theory, states that female employees earn less on average because employers continue to employ discriminatory payment systems.6 As evidence supporting this argument, research suggests that women even earn substantially less in positions of power, such as corporate executives.7

Recognizing that the gender wage gap was in fact at least partially caused by discriminatory employment practices,8 Congress enacted the Equal Pay Act of 1963 (EPA)9 to supplement preexisting labor law statutes.10 The EPA unequivocally prohibits employers from paying male and female employees working comparable jobs different wages solely based on an employee.s sex.11 However, it is also narrowly tailored to protect legitimate business practices. This otherwise sweeping prohibition on discriminatory payment practices contains exceptions for gender-based disparities in pay resulting from "(i) a seniority system; (ii) a merit system; (iii) a system which measures earnings by quantity or quality of production; or (iv) a differential based on any other factor other than sex."12

Under a liberal construction of these exceptions, most discriminatory payment practices could be insulated from judicial scrutiny. However, most courts reject that interpretation. Instead, they maintain that the EPA created a cognizable cause of action for employees that believe their gender unjustly influences their salary. Most courts hold that the EPA exceptions are active defenses against allegations of gender-based pay discrimination that can only be used once an employee has made out a prima facie case that disparities in pay are directly related to his or her gender.13

In interpreting the fourth exception, "a differential based on any factor other than sex," the Second, Sixth, Ninth, and Eleventh Circuits have held that under the EPA, once an employee establishes a prima facie case of gender-wage discrimination, the burden shifts to the employer to state an "acceptable business reason" for their disparate payment practices.14 In these circuits, employers must affirmatively provide reasons that serve legitimate business purposes. It is not enough to provide a veiled or neutral reason such as unqualified statements that their pay systems are based on their employees. prior earnings.15 When employers offer explanations that do not provide any indication of their underlying intent, these circuits will consider whether the "use [of] the factor [was] reasonabl[e] in light of the employer.s stated purpose as well as its other practices."16 In other words, these courts will not presume that the expressed reason was legitimate. Rather, they will consider whether the expressed reason was no more than a pretext for gender discrimination.17

Other circuits, however, have balked at the majority circuits. willingness to question the legitimacy of an employer.s pay system that is based on employees. prior earnings.18 In the 1980s, the Eighth Circuit was the first to avoid inquiring into the possibility that an employer.s seemingly gender-neutral payment practice was a cover for impermissible gender-wage discrimination.19 Subsequently, in dicta, the Seventh Circuit followed suit and tentatively abandoned the "acceptable business reason" requirement. …

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