What Is the Equal Pay Act of 1963?
The Equal Pay Act of 1963 is a U.S. law that prohibits employers from paying different wages to men and women who work under similar conditions and whose jobs require the same level of skill, effort, and responsibility. It is part of the amended Fair Labor Standards Act of 1938. The act was an important milestone in gender equality, though of course wage gaps by gender persist.
- Employers must give men and women the same pay and benefits when their jobs are substantially equal.
- When they don’t, employees can file a lawsuit and potentially receive back pay, a pay adjustment, and reimbursement of legal fees.
- Employers have four main defenses to Equal Pay Act claims; these defenses have been interpreted in different ways by different courts.
Understanding the Equal Pay Act of 1963
Based on the principle of equal pay for equal work, the Equal Pay Act applies to all forms of compensation. Salary, wages, overtime, bonuses, and benefits all factor in, as do stock options, profit-sharing plans, vacation and holiday pay, vehicle allowances, and expense reimbursements.
The U.S. Department of Labor conducted studies before the act was passed and found that men were earning more than women for the same job in some industries. One key finding, according to reporting by The New York Times, was that some women were earning $8 to $20 less per week than men for the same office work. In 2021 dollars that’s about $70 to $180 per week or about $3,600 to $9,400 per year. As noted by the Times, female college graduates were earning substantially less than their male counterparts.
Congress passed the Equal Pay Act in May of 1963, and President Kennedy signed it into law on June 10. The act states that gender-based pay discrepancies depress employees’ pay and living standards, keep labor resources from being maximized, cause labor disputes that disrupt business, burden commerce and the free flow of goods, and are a form of unfair competition. The law went into effect for most employers one year later.
The Equal Employment Opportunity Commission is responsible for enforcing the Equal Pay Act. The Department of Labor is allowed to enter and inspect businesses and their records, investigate and gather data, and speak with employees to see if an employer has violated the act or to make sure an employer is complying with the act. The federal government can ask state and local agencies to help with such efforts and reimburse them for such services.
Employers subject to the Equal Pay Act must keep records of their employees and their wages, hours, and working conditions.
Benefits of the Equal Pay Act
When employers violate the Equal Pay Act, employees can file a lawsuit and potentially be awarded back pay, a pay adjustment, and reimbursement of legal fees. Pay discrimination lawsuits that employees have won based on the Equal Pay Act illustrate ways the act has helped workers. Here are just a few examples.
In 1970, AT&T worked out a settlement with the federal government, agreeing to pay $15 million in back wages, mostly to women, and $30 million to future pay adjustments. A second decree was issued, and AT&T had to pay another $30 million to rectify pay discrimination among approximately 25,0000 managers. The agreement also required AT&T to overhaul its processes for determining salaries.
A few years later, in 1974, female flight attendants won back pay and interest in a lawsuit against Northwest Airlines for being paid less than men for the same work and for being required to share hotel rooms with each other on layovers while men received their own rooms.
A class-action lawsuit in 1997 resulted in a settlement for which Home Depot agreed to pay $65 million to 25,000 women who said the company had discriminated against them regarding pay, promotions, hiring, and job assignments. The company also agreed to cover the women’s legal fees and implement improved human resources practices.
More recently, the law has helped empower women to bring pay discrimination lawsuits against Goldman Sachs, Google, and Oracle. While the Goldman Sachs and Oracle cases are still unfolding, in June 2022, Google agreed to pay $118 million to resolve the California state court class action brought on behalf of over 15,000 female former employees.
Eliminating discrimination based on sexual orientation or gender identity and promoting pay equity are priorities of the Women’s Bureau of the U.S. Department of Labor under the Biden administration.
Criticisms of the Equal Pay Act
The American Bar Association has identified a number of reasons why the Equal Pay Act has not achieved its goals. For example, gender discrimination is difficult for employees to prove, and the penalty of back pay, increased wages, and attorney’s fees for an employee who wins a lawsuit is not a sufficient deterrent for employers. Some court decisions have undermined the law. And the law’s definition of “establishment” is too narrow, given that employers may have many places of business (not to mention employees who work from home).
Proposed legislation called the Paycheck Fairness Act, passed by the House of Representatives on April 15, 2021, could remedy the Equal Pay Act’s shortcomings and make greater progress toward rectifying income inequality. The act would need to pass the Senate and be signed by the president to become law. This act and similar legislation have been introduced without becoming law in previous years, but it may have better prospects when Democrats control both the Senate and the House.
Does the Equal Pay Act of 1963 Apply to Nonbinary, Agender, and Transgender Individuals?
Though the language of the Equal Pay Act refers to women and men, employers should not assume that this language would protect them against a pay discrimination lawsuit brought by an employee with a different gender identity.
How Do Employers Defend Themselves Against Claims of Unequal Pay?
Employers have four legal defenses against unequal pay, and these defenses have been interpreted in different ways by different courts.
- Quantity or quality of work
- A difference based on another factor that is not gender
Employers can also protect themselves with employment practices liability insurance (EPLI) and pay equity audits.
How Can Employees Fight Back Against Unequal Pay?
Employees have two years to file a lawsuit against an employer for violating the Equal Pay Act. The statute of limitations is three years if the employer intentionally violated the act. Employees who think they have been paid less because of their gender may file a claim under the Equal Pay Act, Title VII of the Civil Rights Act, or both. Employees may also be covered by state laws that may be stronger than federal ones.