Overtime Salary Adjustments Could Violate Equal Pay Act

The new overtime rule is causing employers to rethink employee compensation, but I fear that one pitfall is being overlooked – an employer who pays a woman less than a man for performing the substantially the same duties could be violating the Equal Pay Act of 1963.

Employers who can’t pay their salaried employees at or above the new white-collar exemption threshold of $47,476 may be forced to pay those same employees on an hourly basis and time and a half for all hours worked over 40 in any one workweek. Overtime scares employers because it is difficult to budget for and requires higher costs for each hour of productivity after the employee has worked 40 hours that week.

So in trying to juggle the new law and payroll costs, employers are reducing pay, overtime opportunities and benefits. That may be good business, but if the impact hits female employees more than male employees, we could see an increase in Equal Pay Act cases.

The Equal Pay Act requires that female employees be paid the same as their male counterparts with substantially similar job duties. “All forms of pay are covered by this law, including salary, overtime pay, bonuses, stock options, profit sharing and bonus plans, life insurance, vacation and holiday pay, cleaning or gasoline allowances, hotel accommodations, reimbursement for travel expenses, and benefits,” the Equal Employment Opportunity Commission points out.

If a woman files a lawsuit against a company for paying her less than a man performing the same work, the employer must show that the male employee’s higher pay is based on a seniority system, a merit system, a productivity system or another factor other than gender. That sounds easier than it is.

“System” indicates that your company has formal written guidelines about seniority, merit and productivity, and factual analyses of those factors, not just a “sense” that Bob has worked harder than Betsy. Your detailed documentation of your compensation decisions (or worse, the lack of any such documentation) as well as any discriminatory behaviors or cutting comments you have ever made about women will all be on display to the jury.

A woman who feels aggrieved by unequal pay has two years from your compensation decision to file suit and she doesn’t have to file an EEOC charge first. Therefore, the decisions that you make today concerning compliance with the new overtime regulations could haunt you for the next two years. That is just one more reason to carefully assess your next steps with regard to compliance with the new overtime rule.

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