Fourth Circuit Requires Parity In Each Component Of Compensation, Not Only In Total Compensation, Under Federal Equal Pay Act

• Published date: 10 December 2021
• Subject Matter: Employment and HR, Employee Benefits & Compensation, Employee Rights/ Labour Relations
• Law Firm: Littler Mendelson
• Author: Alice H. Wang

On December 3, 2021, the U.S. Court of Appeals for the Fourth Circuit rejected the notion that under the federal Equal Pay Act (EPA), equality should be assessed based on total compensation, holding instead that equality must be satisfied regarding each component of compensation. Sempowich v. Tactile Sys. Tech., Inc., No. 20-2245, 2021 WL 5750450 (4th Cir. Dec. 3, 2021). The Fourth Circuit hears appeals from the nine federal district courts in Maryland, Virginia, West Virginia, North Carolina, and South Carolina. This case has significant implications for how employers in the Fourth Circuit structure compensation.

The Federal Equal Pay Act

The EPA prohibits employers from discriminating "between employees on the basis of sex by paying wages to employees ... at a rate less than the rate at which [it] pays wages to employees of the opposite sex" for jobs requiring equal skill, effort, and responsibility, performed under similar working conditions. In other words, to prove a prima facie case under the EPA, an individual must show: (1) the employer paid higher wages to an employee of the opposite sex of plaintiff; (2) plaintiff and the comparator employee performed work that required equal skill, effort, and responsibilities; and (3) plaintiff and comparator employee performed that work under similar working conditions in the same establishment. The initial showing permits an inference that a pay disparity exists on the basis of sex.

The EPA provides the following exceptions to the general prohibition, which are affirmative defenses to liability: the pay differential is based on (i) a seniority system; (ii) a merit system; (iii) a system which measures earnings by quantity or quality of production; or (iv) any other factor other than sex.

Factual and Procedural Background Regarding Sempowich's Equal Pay Claim

In Sempowich, the issue on appeal regarding the EPA claim turned on the appropriate metric for assessing wage discrimination under the EPA. The plaintiff argued the proper metric is the rate at which an employer pays an individual, while the employer argued that the proper metric is the employee's total wages.

The employer, a medical device company, hired the plaintiff to work as a product specialist. Several years later, it promoted her to be the regional sales manager for the mid-Atlantic region. That same year, the employer hired a male regional sales manager for the southern region. In granting summary judgment, the lower court assumed without...