Unequal Pay: If Your Client Discriminates, You Could Pay

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Nov 18, 2013

You probably don’t realize it, but you’re directly liable for equalizing the pay of a candidate hired by a client. It’s like having someone on your payroll for months (or years) without knowing it and without benefiting from it. You owe “back pay” — all the way back to the start date. You can even owe it if the job was vacant and a former employee of the opposite sex earned more.

The federal Equal Pay Act (29 USC 206(d)) is enforced by the Equal Employment Opportunity Commission. It directly prohibits a recruiter and employer from discriminating within any “establishment” (workplace) between:

(E)mployees on the basis of sex by paying wages . . . at a rate less than the rate at which (the employer) pays wages to employees of the opposite sex . . . for equal work on jobs the performance of which requires equal skill, effort, and responsibility, and which are performed under similar working conditions, except where such payment is made pursuant to (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 factor other than sex. (29 USC 206(d) (1))

As you can see, the law is explicit. So explicit that you might think merely taking a job order and filling it wouldn’t subject you to liability. That could be a very expensive thought — logically and legally you can’t participate in a violation of the law: You can’t place a female candidate at a lower rate of pay than a male for the same job (or vice versa). If you do, an EEOC investigator or process server will be knocking at your door.

The courts have interpreted the EPA as including “employment agencies” in the “generally accepted sense of the term.” Contingency search firms are also included, since they are “in the business of procuring employees or applicants” (Cannon v. University of Chicago, 441 US 677, 99 S.Ct. 1946, 60 L.Ed.2d 560).

As noted by attorney Claire Thomas in her book, Sex Discrimination in a Nutshell: “Inclusion of . . . employment agencies ensures that elimination of discrimination against . . . women in employment is not frustrated by discriminatory action on the part of these entities.”

What if:

  • You didn’t know the employer listed a JO intending to hire a woman for less money?
  • The employer gave you a range and just paid a female less because she was earning less on her former job?
  • The employer hired the female candidate at a lower starting salary just to reduce your contingency fee?

Either You Did Or You Didn’t

The answer to all of these questions is: “You are liable.” Absolutely liable. Lack of intent to violate the law, “good faith” (whatever that is), wage competitiveness, and other mitigating circumstances don’t apply here. It’s like running a stop sign — either you paid less to a female than a male holding the same job or you didn’t.

Let’s dissect the EPA like a U.S. prosecutor. Although it’s gender-neutral, we’re assuming the discrimination is against females. Statistically, that’s a very safe assumption.

1. Is The Recruiter An “Enterprise Engaged In Commerce”?

For jurisdictional reasons, the federal law only applies if there is enterprise coverage. You must have two or more employees “engaged in commerce” to be directly liable.

As a practical matter, everyone who makes a cold call or mails a fee schedule is engaged in interstate commerce (Hodgson v. Travis Edwards, Inc., 465 F2d 1050). This is just a historical vestige that nobody seriously argues any more. The requirement of “two or more employees” isn’t a major problem either. Even a solo participates with the employer in the placement. Therefore liability can be indirectly imposed under the common law conspiracy theory. Although it hasn’t been adjudicated in a reported decision, your knowledge of the discrimination would probably be required.

2. Does The Employer Have More Than One “Establishment”?

Male and female employees doing equal work at different “establishments” of the same employer don’t have to be paid equally (29 CFR 800.103). There is a valid defense under Phillips, Inc. v. Walling (324 US 490 65 S.Ct 807, 89 L.Ed. 1895). If the employer has:

  1. Two or more buildings separated geographically (no minimum distance is given), and;
  2. Males at one and females at another doing the same job.

However, recent rulings are recognizing that human resources functions are centralized and that employees are reassigned and relocated regularly. Where the facts show these things, even a national corporation can be considered operating a single “establishment” (Brennan v. J. M. Fields, Inc., 488F.2d 443).

3. What About Hiring Someone As A Replacement?

You might think that if a male manager leaves and your female candidate is hired as an assistant manager for less, you’d be safe. After all, there’s no male in the job, so no unequal pay is being paid; and, she’s being hired at a lower level job already established by the employer.

That could be a very expensive thought, too (Hodgson v. Behrens Drug Co., 475 F.2d 1041). Every time you place a female in a male’s job and the pay is lower, you might hear a knock.

If you remember nothing else from this report, ask the employer: “Is the job a new position or a replacement?”

If it’s a replacement:

  1. “Who formerly occupied the job?”
  2. “How much was he paid?”
  3. “What were his skills?” (Education, training, experience and overall ability.)

4. Are The Jobs “Substantially Equal”?

The courts recognized immediately that an employer could easily change the job description to reflect different duties. In doing so, they stated that “equal” meant “substantially equal” not “identical” (Shultz v. Wheaton Glass Co., 421 F.2d 259).

In the words of one U.S. Court of Appeals:

(The) Equal Pay Act does not authorize courts to equalize wages merely because they find two substantially different jobs are worth the same monetarily to the employer. (However) jobs of the same or closely related character should be compared. Hodgson v. Miller Brewing Co.  457 F.2d 221

In determining “substantial equality” job descriptions and titles are not all the courts are to consider. They are to look at the actual duties being performed (29 CFR 800.121). In one noteworthy case, the female head of an insurance company division could not justify equal pay to males heading other divisions even though the work required similar skill, effort, and responsibility. The court found each division was “substantially different” (Orr v. MacNeill & Sons, Inc., 511 F.2d 166).

5. What Factors Other Than Sex Can Justify Lower Pay?

Of course, “factors other than sex” can be anything. So the courts rule that female “prevailing wages,” availability for work, and even willingness to accept less are not factors that justify lower pay. They might be real, but their reality is exactly why the EPA was enacted (Hodgson v. Brookhaven General Hospital, 436 F.2d 719 (app.) 470 F.2d 729).

Males can be transferred, laid off, or terminated — it doesn’t change the equal pay requirement once the rate is established (Hodgson v. Miller Brewing Co., 457 F.2d 221).

6. How Does Enforcement Proceed?

The feds can file a lawsuit without even attempting conciliation. Although it is injunctive (requiring compliance) in nature, an order for back wages is specifically authorized (29 USC 217). The order is enforced by contempt proceedings.

The EPA also allows an injured employee to file a lawsuit directly against you and the employer (29 USC 216(b)). The amount by which the salary was reduced becomes the back pay (ascertained liquidated damages) due, along with attorney’s fees and costs. The candidate can’t have it both ways, though. If she elects to have the EEOC prosecute on her behalf (29 USC 216(c)), she can’t file privately.

As with all protective labor laws, it is:

(Unlawful) to discharge or in any other manner discriminate against any employee because such employee has filed any complaint or instituted any proceeding, or has testified or is about to testify in any such proceeding. (29 USC 215(a)(3))

A recruiter’s absolute responsibility under the Equal Pay Act is best summarized by attorney Mack Player in his book Federal Law of Employment Discrimination in a Nutshell: ”Equality of work is an objective fact. Plaintiff need not present evidence of improper motivation.”

Now you know. Placing candidates in violation of the EPA is like hiring your candidates and receiving absolutely nothing in exchange except a lower placement fee.

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