Defending the "acceptable business reason" requirement of the Equal Pay Act: a response to the challenges of Wernsing v. Department of Human Services.

• Author: Pagan, Ruben Bolivar

1. INTRODUCTION II. BACKGROUND A. History of Inequity B. Congressional Remedy: The Equal Pay Act of 1963 1. Legislative History 2. Title VII and the Bennett Amendment C. Judicial Interpretation of the "Differential Based on Any Other Factor" Clause 1. The Supreme Court's Guidance in Corning Glass Works and Gunther 2. Majority View a. The Ninth Circuit in Kouba b. The Sixth Circuit in EEOC c. The Eleventh Circuit in Glenn d. The Second Circuit in Aldrich 3. Minority View a. The Eighth Circuit in Strecker b. The Seventh Circuit in Wernsing III. ANALYSIS A. Legislative History of the Equal Pay Act 1. Committee Reports 2. Express Language of the Equal Pay Act B. Market Force Theory vs. Comparable-Worth Theory 1. Market Force Theory a. Comparable-Worth Advocates' Challenge b. The Supreme Court's Rejection of Market Force Theory Analysis in EPA Suits c. Use of Market Force Theory in Wernsing 2. Comparable-Worth Theory a. Economists' Challenge b. Redeeming Comparable-Worth Theory IV. RECOMMENDATION A. All Circuits Should Join the Majority View B. Businesses and Corporations in the Seventh, Eighth, and Undecided Circuits Should Voluntarily Adopt Payment Policies That Do Not Strictly Rely on Employees' Prior Wages V. CONCLUSION I. INTRODUCTION

   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 advancements. (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. Finally, in 2005, the Seventh Circuit expressly joined the Eighth Circuit to create a significant circuit split with regard to whether the EPA requires courts to consider the legitimacy of an employer's seemingly gender-neutral rationale for adopting a discriminatory payment practice. (20)

   This Note analyzes the Seventh Circuit's rationale for failing to find that the "acceptable business reason" requirement is integral to the "any other factor than sex" defense. In particular, it responds to the Seventh Circuit's assertion that the "acceptable business reason" requirement "rests on an 'intent' that, if not manufactured by the judges rather than discovered by digging through legislative debates, lacks any footing in enacted texts." (21) Part 11 of this Note reviews the legislative history of the EPA and the principal appellate court cases interpreting the meaning of "any other factor than sex." Next, Part III discusses whether a clear congressional intent can be identified in the congressional record corresponding to the enactment of the EPA. Then, Part III analyzes the strengths and weaknesses of two competing sociological theories implicated in the majority and minority circuit interpretations of the "factor other than sex" clause that offer competing rationales for, and draw distinct normative conclusions about, gender-based pay disparities. Based on this discussion, this Note argues that the majority circuits have properly interpreted the "factor other than sex" clause. Part IV identifies weaknesses and practical difficulties in the Wernsing opinion that further favor the "acceptable business reason" requirement interpretation of the "factor other than sex" defense and encourages the minority circuits and undecided circuits to embrace the majority interpretation. Finally, Part V explains how the Seventh Circuit has established a precedent detrimental to its employees and corporations.

2. BACKGROUND

   1. History of Inequity

      In the past, American employers, on average, paid female employees less than male employees. (22) When the EPA was enacted in the 1960s, women earned 61% of what men earned for the same work. (23) Over the years, following its enactment, the gender-wage gap declined. However, women still only earn approximately 81% of what men make. (24) The gap in managerial, professional, and related occupations is even greater. In these sectors, the gap has only improved by about ten percent. (25)

   2. Congressional Remedy: The Equal Pay Act of 1963

      1. Legislative History

         In 1963, Congress took steps to redress this inequity by enacting the EPA. (26) The EPA's express purpose was to insure that "where men and women are doing the same job under the same working conditions ... they will receive the same pay." (27) To this end, the EPA prohibits gender discrimination in pay for "equal work on jobs the performance of which requires equal skill, effort, and responsibility and which are performed under similar working conditions." (28)

         Responding to the concerns of labor representatives, who feared that the EPA would prohibit pay systems based on seniority or merit, (29) Congress provided three specific exceptions and one categorical exception. (30) These exceptions, however, were not added solely to undermine the EPA's effectiveness. (31) Rather, they were added to protect "bona fide job classification program[s]" from charges of discrimination. (32)

      2. Title VII and the Bennett Amendment

         The following year, Congress enacted further legislation, Title V11 of the Civil Rights Act of 1964, to provide comprehensive protection against discriminatory practices in the workforce. (33) While protection against gender discrimination under Title V11 is not the focus of this Note, it is significant to point out that the legislative trend has been the continued reaffirmation of Congress's commitment to the eradication of gender discrimination while insulating expressly permitted business practices. (34) Consistent with that trend, Congress enacted the Bennett Amendment to Title V11 in 1964, which reaffirmed that Congress had prohibited gender discrimination but that compensation systems based on seniority or merit were not discriminatory. (35)

         The Amendment limited the expansive sweep of Title V11 by extending "the affirmative defenses to wage discrimination claims under the Equal Pay Act into Title VII." (36) There is no reason, however, to interpret the enactment of the Bennett Amendment as a deviation from Congress's commitment to the elimination of gender-based discriminatory pay practices. The extension of the EPA defenses to actions under Title V11 is merely an affirmation of Congress's...