The Equal Pay Act prohibits employers from paying a female employee less than a male employee for work that requires substantially equal skill, effort and responsibility, and that is performed under similar working conditions within the same establishment. The EPA does not require proof of discriminatory intent, and an employer will be held liable to a woman who is paid less than a similarly-situated man unless it can show that the discrepancy is attributable to: (1) a bona fide seniority system; (2) a merit system; (3) a system that measures earnings by quantity or quality of production; or (4) any factor other than sex. 

Most federal courts- but not all- have interpreted the EPA’s “factor other than sex” defense to require an employer to show that the pay differential is consistent with a legitimate business purpose.  Recently, the United States District Court for the District of Vermont weighed in, finding that “factors other than sex” must be business-related and capable of explaining the entirety of the pay gap alleged. 

In Dreves v. Hudson Group (HG) Retail, LLC., the female plaintiff was terminated and replaced with a man, who was paid $52,500, whereas the plaintiff had been paid approximately $48,500.  Plaintiff brought claims under the EPA and the Vermont equivalent, but moved for summary judgment only on her state law claim. However, as the Court noted, the state and federal statutes are substantially identical and it applied federal law in deciding the plaintiff’s summary judgment motion.

The employer defended the motion for summary judgment on the basis that it had used “factors other than sex” in deciding to pay plaintiff’s male replacement more than it had paid plaintiff.  Specifically, the employer claimed that it had to pay the male replacement more as an inducement to relocate to Vermont with his wife, who held a part-time job in New Hampshire, and his children, who were in school.  The employer further argued that the male replacement drove a hard bargain, by rejecting the first offer made to him as too low.

Not good enough, the Court held, in finding that the employer had violated the Vermont EPA.  Consideration of the male replacement’s family circumstances was not related in any way to the unique characteristics of the position, his qualities or abilities, or any critical need of the employer’s operation.  Further, the Court found, “there is simply no basis for the proposition that a male comparator’s ability to negotiate a higher salary is a legitimate business-related justification to pay a woman less.”  To hold otherwise, the Court continued, would require it to accept the argument, repudiated by the Supreme Court in Corning Glass Works v. Brennan, that employers are justified in paying men more than women because market forces are such that men command higher salaries in the marketplace

This case underscores the need for employers to make carefully reasoned, gender-neutral compensation decisions, based on business-related factors such as skills and experience.