Second Circuit Clarifies Standards for Asserting Equal Pay Claims Under Title VII

Second Circuit Clarifies Standards for Asserting Equal Pay Claims Under Title VII
December 13, 2019 RPJ Law

December 13, 2019

The U.S. Court of Appeals for the Second Circuit has issued a “clarifying” ruling, Lenzi v. Systemax, Inc., No. 18-979, 2019 WL 6646630, at *1–2 (2d Cir. Dec. 6, 2019), holding that a plaintiff seeking to assert claims under Title VII of the Civil Rights Act of 1964 for substandard pay on discriminatory grounds does not have to meet the exacting statutory standards of proof required under the federal Equal Pay Act of 1963 (“EPA”).

In Lenzi, the plaintiff (referred to in the Court’s opinion by her married name, Danielle Markou), asserted claims, among other things, for unequal pay on the basis of her gender under Title VII and the EPA. She had previously held the positions of Director of Risk Management and later Vice President of Risk Management at defendant Systemax, Inc. During the course of her employment, Markou complained in emails about her below-market compensation and contended during discovery that she had orally claimed gender bias as well. Although Systemax did raise her pay somewhat, she insisted that her compensation remained below market rates. In particular, she submitted evidence that the Vice President for Internal Audit, the Controller and other top male executives at Systemax were paid in excess of the industry benchmarks for these positions, while she herself received pay below the benchmark for hers. Notably, the evidence showed that the benchmark for her position differed from the benchmarks for the positions held by the male executives at issue. In other words, there was no one else at the company who had a directly comparable position to hers who was paid more than she was.

For this reason the District Court granted summary judgment dismissing Markou’s claims under the EPA. The EPA prohibits employers from discriminating against employees on the basis of sex by paying higher wages to employees of the opposite sex for equal work. To establish a claim, a plaintiff must make an initial prima facie case showing that “(1) the employer pays different wages to employees of the opposite sex; (2) the employees perform equal work on jobs requiring equal skill, effort, and responsibility; and (3) the jobs are performed under similar working conditions.” Belfi v. Prendergast, 191 F.3d 129, 135, 139 (2d Cir. 1999); 29 U.S.C. § 206(d). New York’s Equal Pay Act imposes a nearly identical prohibition, including a requirement that a plaintiff show substantial similarity between the positions in question. N.Y. Lab. L. § 194. It is noteworthy that “proof of the employer’s discriminatory intent is not necessary for the plaintiff to prevail on her claim [under the EPA].” Belfi, 191 F.3d at 136. Both the federal EPA and the NYEPA provide additional liquidated damages beyond actual damages for willful violations of the statutes. 29 U.S.C. § 216(b); N.Y. Lab. L. § 194 (1-a).

The EPA’s requirement that an employee prove that he or she was paid less than a similarly situated employee of the opposite sex (a “comparator”) in order to bring a claim can be difficult to establish, especially for executive positions with different levels of expertise, experience and training. For example, in Garcia v. Barclays Capital, Inc., 281 F. Supp. 3d 365, 387 (S.D.N.Y. 2017), the Southern District of New York rejected the plaintiff’s EPA claim because of her failure to show substantial similarity with five male executives who held positions with varying responsibilities. Accordingly, the Second Circuit in Lenzi did not disturb the District Court’s dismissal of Markou’s EPA claims. However, the Second Circuit did reverse the District Court’s dismissal of the Title VII claim based on subpar compensation, finding that the existence of a similarly situated male comparator was not a necessary component of a Title VII claim.

Courts have long held that Title VII, as well as the EPA, provides a basis for relief for an employee who is paid less as a result of gender. Title VII makes sex-based compensation discrimination actionable by its plain terms: “It shall be an unlawful employment practice for an employer…to discriminate against any individual with respect to his [or her] compensation…because of such individual’s…sex….” 42 U.S.C. § 2000e-2(a)(1). Unlike the EPA, Title VII also requires evidence of discriminatory intent. See, e.g., Tomka v. Seiler Corp., 66 F.3d 1295, 1313 (2d Cir. 1995), abrogated on other grounds by Burlington Indus., Inc. v. Ellerth, 524 U.S. 742, 765 (1998).

It has been unclear for some time whether a plaintiff asserting an equal pay claim under Title VII is required to meet the standard set in the EPA by showing that she was paid less than a similarly situated comparator. The Second Circuit, in Tomka, 66 F.3d at 1312, had held that “[a] claim of unequal pay for equal work under Title VII…is generally analyzed under the same standards used in an EPA claim.” This pronouncement led a number of district courts within the Second Circuit to reject claims under Title VII where a plaintiff was unable to identify a similarly situated comparator. Thus, the District Court in Lenzi, citing Tomka, held that in order to establish pay discrimination in violation of Title VII, Markou was required to demonstrate under both the EPA and Title VII that the positions held by her alleged comparators were substantially similar to her own. The District Court found that Markou had failed to meet this test and dismissed her claims for equal pay under Title VII.

The Second Circuit reversed, holding that Title VII unambiguously makes actionable “any form of sex-based compensation discrimination.” The Second Circuit noted that under both the EPA and Title VII “one way an employer might discriminate against an employee because of her sex is to pay her less than her male peers who perform equal work.” However, the Second Circuit catalogued scenarios in which a woman might have a claims under Title VII (but not under the EPA) where there was not similarly situated comparator. These included: (1) an employer’s hiring of a woman for a “unique position in the company,” but then paying her less than it would “had she been male,” citing Washington County v. Gunther, 452 U.S. 161, 179 (1981); and (2) an employer’s using “a transparently sex-biased system for wage determination” without the “availability of direct male comparators.” The Second Circuit, again citing Washington County, held that “grafting the EPA’s equal-work standard onto Title VII would mean ‘that a woman who is discriminatorily underpaid could obtain no relief—no matter how egregious the discrimination might be—unless her employer also employed a man in an equal job in the same establishment, at a higher rate of pay’”—a standard which the Second Circuit held unwarranted.

The upshot of Lenzi is that disparate pay claims may be asserted under Title VII without the need of a similarly situated comparator, meaning that if an employee can prove discriminatory intent, it is not necessary to point to a comparator in the organization who is paid more for the same work. However, because of the liquidated damages provisions of the EPA and state statutes like the NYEPA, and the possibility of obtaining relief without proving discriminatory intent, plaintiffs will continue to attempt to assert claims under these statutes requiring similarly situated comparators.

For employers, the Second Circuit’s decision in Lenzi will underscore the requirement that all employees be treated on their own merits, and will further encourage employers to ensure that compensation decisions are well-justified and documented at the time that they are made.

Mark H. Moore: Second Circuit Clarifies Standards for Asserting Equal Pay Claims Under Title VIIThis article is intended only as a general discussion of these issues. It is not considered to be legal advice or relied upon. For additional information on this topic, please feel free to contact Mark H. Moore, who regularly counsels and litigates for clients in connection with employment and business matters.