Federal law requires employers to pay equal wages to men and women for substantially equal work.
“Equal pay” includes not only the employee’s base salary or hourly wage, but also the other factors included in compensation such as bonuses, profit sharing plans, stock options, and opportunities for overtime pay. It also includes employee benefits such as health, dental and life insurance, vacation and holiday pay and reimbursement of expenses.
“Substantially equal work” means work that is performed by employees who work within the same establishment, perform their jobs under similar working conditions, and perform jobs that require the same skills, effort and responsibility. For example, if an employer hires a man to work in customer service for residential sales and a woman to work in customer service for commercial sales, and both jobs are located in the same facility, with the same hours, each reporting to their respective Customer Service manager, and both jobs require the same skills, effort and responsibility, even though their customer base is different, those employees need to be compensated the same – unless the employer can point to a business reason for any disparity.
If both of these employees have college degrees but not graduate degrees, if both lack previous industry experience but have the same general job experience, if both started work on or about the same day, work at the same location, and perform the same or similar tasks and responsibilities, then the employer must provide that man and that woman with the same compensation.
Employers are permitted to pay unequal wages to men and women if there is a reason for the disparity that is not based on gender. Of course, if the jobs themselves are not substantially equivalent then pay does not need to be equal between men and women working for the same company. For example, if one employee has supervisory duties and the other does not, if one job requires out of town travel and the other does not, if one requires an advanced degree and the other does not, the jobs are substantially different in degree of discretion and responsibility, then the pay can be different. Other factors that can support disparities can be based on factors related to the employees themselves such as years of industry experience, particular coursework, certifications or training, length of time in the same or similar jobs or merit.
Employers should consult with counsel regarding any questions they may have regarding the federal law, called the Equal Pay Act, or any applicable state or local laws to ensure that they are compliant with the requirements for equal pay.