What Every Employer Needs to Know to Avoid Wage Discrimination
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[fa icon="calendar"] Sep 5, 2019 8:00:00 AM / by Michelle Nystrom

Michelle Nystrom

What is Wage Discrimination?

What Every Employer Needs to Know to Avoid Wage DiscriminationDespite the fact that similarly qualified workers who perform the same job duties for the same employer should be paid equal wages, this is often not the case. Unfortunately, minorities and women have historically been paid less than white males even when performing the same jobs with the same level of performance and responsibilities. This is known as wage discrimination. 

As an employer, it’s extremely important that you do not practice wage discrimination when paying your employees. Whether it’s done on purpose or as a result of an accidental oversight, wage discrimination is against the law. Businesses that are caught practicing wage discrimination will not only face stiff penalties, but will also experience a serious blemish on their reputation, making it especially difficult to attract high-quality job candidates.


What Employers Need to Know

The Civil Rights movement in the 1960s helped bring about many laws to help protect minorities and women from discrimination, especially in the workplace. These anti-discrimination laws help protect the rights of all American workers and help ensure that they are treated fairly by their employers. The following are the most important of the federal non-discrimination laws which employers must continue to follow to this day:


Equal Pay Act of 1963

The Equal Pay Act of 1963 (EPA) is an amendment to the Fair Labor Standards Act that was passed to prevent wage discrimination based on gender. The amendment was enacted in an attempt to correct the pay inequality existing between men and women who were performing the same job duties. 


The EPA also makes an important distinction between job titles and job content. Employers cannot practice wage discrimination by providing different job titles to their employees despite the fact that they perform the same job duties. If the work performed by the employees is very similar and require the same effort and skills, then their pay should be equal. To ensure that employers don’t attempt to find loopholes to practice wage discrimination, equal pay applies to all forms of pay, including salary, bonuses, overtime wages, profit sharing, stock options, holiday pay, vacation pay, expense reimbursements, benefits, and life insurance.


Factors that Determine Equal Job Content

Whether or not the content of two job positions can be considered equal is based on the following factors:

  • Skill - When comparing the skills of two employees, the more important issue is not what skills the employees have, but what skills are required for the job that they have. These skills are measured by experience, education, and training.

  • Effort - Effort refers to how much physical or mental exertion is required to perform the job.

  • Responsibility - Responsibility refers to how much accountability is required by the employee in order to perform the job.

  • Working Conditions - The working conditions of the employees takes into account any hazards involved in doing the job as well as the physical surroundings, which include the temperature, exposure to fumes, and the level of ventilation of the job site.

  • Establishment - Employees are only protected against wage discrimination if they work within the same establishment, which is the physical location of business and not necessarily the entire business or enterprise that consists of numerous places of business. For example, a business might have multiple locations around the country. An employee with the same job on one side of the country may be paid differently than an employee on the other side of the country due to factors like state defined minimum wages and differing costs of living. However, the law does apply to employees who are hired in the same place but then assigned to different locations afterwards.


Title VII of the Civil Rights Act of 1964

While the EPA covers wage discrimination based on gender, Title VII of the Civil Rights Act of 1964 provides much more comprehensive protection against discrimination in the workplace. Under Title VII, employers cannot discriminate against employees or job candidates on the basis of perceived racial, sexual, religious, age, disabilities, or national characteristics in regards to any aspect of employment, including hiring, firing, wages, testing, recruitment, use of company facilities, fringe benefits, retirement plans, disability leave, job advertisements, transfers, promotions, layoffs, and more. The provisions of Title VII also cover the ADA (Americans with Disabilities Act) and the ADEA (Age Discrimination in Employment Act). 


Who is Covered by this Law?

The law applies to employers with 15 or more employees, including public companies, private companies, government agencies, labor organizations, and employment agencies that control apprenticeship and training.


Scenarios when Employers Violate this Law

There are many different scenarios in which you could violate the law established under Title VII. Here are a few examples of Title VII violations:

  • If you hire a disabled employee and pay him or her less than an able bodied employee despite the fact that the content of their jobs are the same or extremely similar. If a difference in pay exists, then you must be able to account for this difference in a satisfactory manner.

  • If you set your compensation for positions predominantly held by white employees or male employees at the level suggested by your job evaluation study but you set the compensation for positions predominantly held by minorities or women below what’s suggested by your job evaluation study, then you’re in violation of Title VII -- even if there’s no clear wage discrimination between equally defined job positions.

  • If you establish a neutral compensation policy that has a negative impact on employees in a protected class and you cannot justify it as being job-related, then you’ll be in violation. An example of this would be providing additional compensation to employees who are married with dependents or who are the primary financial contributor to their household. Such a policy can have a disparate impact on women.

  • If you make employment decisions based on assumptions about covered characteristics -- even if it’s a decision to not take a certain action -- it will be considered a violation. For example, if you decide not to promote a female employee to a management position because you don’t think women are a good fit for leadership roles, this would be a clear violation of Title VII. 


Laws Specifically Against Discriminatory Federal Contractors

Because Title VII specifically protects workers of companies with 15 or more employees, several laws were passed to protect employees of federal contractors against discrimination. These include the following anti-discrimination laws:

  • Executive Order 11246 - Executive Order 11246 protects employees against discrimination-based employment decisions made on the basis of race, color, sex, religion, sexual orientation, nationality, or gender identity by contractors who obtain more than $10,000 in government business in a year.

  • Executive Order 13665 - Executive Order 13665 protects employees against discrimination by federal contractors based on the inquiries, discussion, or disclosures of compensation.

  • Section 503 of the Rehabilitation Act - Section 503 protects employees of federal contracts against disability-based discrimination.

  • Vietnam Era Veterans’ Readjustment Assistance Act - The Readjustment Assistance Act protects employees against federal contractors that discriminate based on protected veteran status.


Age Discrimination in Employment Act of 1967

The Age Discrimination in Employment Act (ADEA) was signed into law by Lyndon B. Johnson in 1967. The bill protects workers in the U.S. who are at least 40 years old from employment-based discrimination based on their age. The ADEA helps provide age-based protections not specifically covered in Title VII. These added protections include the following:

  • Benefits cannot be denied based on age. 

  • Employers are prohibited from making statements of specifications in regards to age preference or age limitations.

  • In an amendment to the ADEA made in 1986, mandatory retirement has since also been prohibited in most sectors. Mandatory retirement based on age is only allowed for executives over the age of 65 who hold high policy-making positions. They must also be entitled to a pension over a minimum annual amount.


Tips for Staying in Compliance

  • Be careful with job ads.

  • Don’t limit benefits to only certain groups or age ranges.

  • Ask for an applicant or employee’s age only if it is truly necessary for a business-related purpose.

  • Don’t set age limits for specific programs.

  • Don’t have any mandatory retirement programs.

  • If you’re implementing a reduction in force (RIF), ensure your severance package includes a waiver or release.

  • Promote based on performance.

  • Train your teams.

  • Don’t make assumptions related to age.

  • Be consistent in applying your policies.

  • Be aware of inadvertent targeting of specific age groups.

  • When creating employee development or high-potential employee programs, do not (even inadvertently) overlook older employees.



Title I of the Americans with Disabilities Act (ADA) was passed in 1990 to further protect the rights of disabled workers. While it also provides similar protections against discrimination that are provided by the Civil Rights Act, the ADA also requires employers to make reasonable accommodations for their disabled employees. This can include providing special equipment so that the disabled employee can do their job properly, providing schedule flexibility to the disabled employee, and making changes to how the employer chooses or communicates work assignments to the disabled employee. 


Title I does note that employers aren’t required to provide accommodations if they involve significant difficulty or expense to the employer. Additionally, the disabled employee must still be able to perform their job and meet the standard performance requirements.


Common Mistakes Employers Make Involving the ADA

  1. Only engaging in reasonable accommodation if the employee formally initiates it. The key here is to engage the employee in an open dialogue.

  2. Refusing to consider an accommodation because it’s too hard or not good for morale.

  3. Focusing on the disability too much and not on essential job functions.

  4. Failing to consider the job description when focusing on the essential job functions (and using outdated descriptions).

  5. Dismissing unreasonable requests without exploring other, more reasonable ones.

  6. Failing to consider other accommodation requests in similar situations.


Although you’ll want to make every effort to remain in compliance with the ADA, there are a few common mistakes that employers make that result in violations. Avoid these common mistakes involving the ADA:

  • Waiting for a disabled employee to formally request a reasonable accommodation. You should initiate an open dialogue with your disabled employees to determine what reasonable accommodations are needed instead of waiting for them to make a formal request.

  • Refusing an accommodation because it takes too much effort to provide or because you believe that it might hurt the moral of other employees. These are not acceptable reasons to deny an accommodation.

  • Losing sight of the fact that a disabled employee is able to perform the functions of their job because you’ve become too focused on the disability itself.

  • Not focusing on the essential job functions when writing a job description for an opening. Using an outdated description can be problematic as well.

  • Outright dismissing an accommodation request deemed unreasonable. Even if it’s unreasonable, you should make the effort to find a more reasonable alternative to accommodate your disabled employees.

  • Failing to consider any other accommodation requests made by employees in similar situations.


Scenarios where Accommodations May be Done

The following are a few examples in which wage discrimination laws are violated as well as how the employer can make changes to maintain compliance.

  • An employee with diabetes - An employee working on the assembly line has diabetes. As a result, they need to disclose that they have diabetes to request certain accommodations. Individuals with diabetes often need to eat at specific times and may need to test their blood sugar or take insulin while on the job. The employer should accommodate them by providing flexibility in their work hour (such as by moving their lunch hour to a more convenient time and by providing flexible work breaks).

  • An employee with a knee condition - A manager that has a knee condition (such as osteoarthritis) may have issues with standing for long periods of time. They may use a cane in order to walk. The employer can make accommodations by making sure their work space is easily accessible (and not forcing them to walk up long stairways) and by providing an anti-fatigue mat to stand on when it’s required that they stand.

  • An employee with a hearing impairment - An employee working as a programmer who has a hearing impairment in one ear may have some difficulty communicating as a result. The employer can accommodate them by meeting with the employee in a quiet space with little noise or distraction where they can communicate more clearly. The employer can also arrange to have written directions provided through email or a chat feature to ensure that the employee clearly understands any work directions provided to them.


Even though you may not have clear prejudices against certain groups of people, you still need to be careful about staying in compliance. We suggest a few tips that will help you avoid making employment decisions that may be deemed discriminatory:

  • When posting job ads, do not target specific characteristics, such as men or women of a certain age, race, etc. Doing so is proof that your hiring practices are in violation of Title VII.

  • Do not limit the benefits that you offer to employees to certain groups or age ranges. 

  • When interviewing job candidates, do not ask how old they are unless it’s necessary for a business-related purpose.

  • Do not set age limits for any of your employment programs.

  • Do not set up a mandatory retirement program since this has been prohibited by amendments to the ADEA.

  • If you’re implementing an RIF (Reduction in Force), which involves the elimination of a specific job or even an entire department, make sure that you include a waiver or release in your severance package.

  • When promoting employees within the company, make sure that you are doing so based on their performance and not based on any specific characteristics.

  • Make sure to train your teams, including training employees in management positions to avoid illegal employment practices.

  • Do not make employment-based decisions (such as hiring or promoting) based on assumptions you’ve made on the basis of age. For example, deciding not to promote an employee because you think that they are too old to succeed in a leadership position.

  • Be consistent when it comes to enforcing your policies. Inconsistent enforcement of policy can be linked to potential discriminatory employment practices.

  • It can be easy to accidentally target certain age groups. For example, if you need to hire someone to perform physical labor, you might mention that you’re looking for young workers in your ad because you don’t want to hire an older person who may not be physically capable of the work. However, this is an age-based assumption that is considered age discrimination. 

  • If you decide to implement an employee development program or high-potential employee program, don’t forget to include older employees. Older employees have the ability to develop as well.


State Laws against Wage Discrimination 

In addition to the federal laws concerning wage discrimination, most states have passed wage discrimination laws as well. Since states have to follow federal laws, wage discrimination laws passed by the state tend to include more stringent guidelines. For example, in addition to the Fair Pay Act, which was passed in 1949 (well before federal wage discrimination laws were passed), California continues to make amendments to improve protections against discrimination. A salary history ban went into effect on January 1, 2018 that prohibits employers from inquiring about current or past salaries or benefits of job candidates. This practice is considered discriminatory since you can use this information to make a salary offer that may not be in line with what you would offer someone else for the same position.


Remember That it is The Employer’s Responsibility to Remain Compliant!

There are many federal and state laws that have been implemented to help protect American workers against discrimination in every form. As an employer, it is your responsibility to remain compliant with these laws and to ensure that no employment-based decision is made on the basis of discrimination -- even if it’s done so inadvertently. Not only will you avoid serious consequences by remaining compliant, but you’ll be more likely to enjoy a good reputation amongst current employees, making it easier to retain talented staff as well as to attract high quality job candidates in the future.


Still unsure if your company is in compliance with these laws? Talk to a trusted advisor today!

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