Pay Equity – Keep Your Eye on Equal Pay for Men and Women

Restaurant operators in California and New York must pay attention now to pay equity, that is, whether they are paying female and male employees equally for similar work. Recent amendments to the state Fair Pay Acts in California and New York significantly narrow the ground upon which restaurant operators may defend paying a woman less than a male employee, or vice versa. The amended state laws require equal pay for similar work and give employers very little discretion to deviate from the mandate.

Losing a case under either the California or New York law will be tremendously costly for restaurant operators. Instead of risking suit, operators must understand now the new legal obligations and take the steps needed to avoid liability.

The Mandate for Equal Pay for Similar Work

Employers must pay women and men equally for “substantially similar work, when viewed as a composite of skill, effort, and responsibility, and performed under similar working conditions,” under the amended California law, for example. This standard means, in part, that an employer violates the law when it pays a female employee less than a male worker even though the two employees have different positions or job titles if the employees perform, for the most part, “substantially similar work.” Restaurant operators, as a consequence, must not only keep an eye on pay equity within each job classification, but across classifications that share at least some core duties.

 In a restaurant group setting, allowing each store to monitor pay equity among only the employees working at that store is plainly insufficient to avoid liability.

Further, in restaurant groups with multiple locations, corporate human resources must compare the pay of female employees with the pay of male employees who work at different stores within the group. The California law specifically does not require equal pay for a female kitchen worker as compared to the male employees in only her restaurant location, but requires that she be paid equally when compared to any male performing similar work in any of the restaurant group’s stores. This aspect of the law makes necessary regular monitoring at the corporate level of compensation across all of the stores in the restaurant group. In a restaurant group setting, allowing each store to monitor pay equity among only the employees working at that store is plainly insufficient to avoid liability.

The amended state laws do not simply outlaw differences in pay when the difference is motivated by gender.  Rather, the point is that the laws mandate equal pay for similar work even where the difference can’t be proven to be based on sex. Operators violate the law when, for example, they pay a male floor manager more than a female floor manager because owners feel the man makes guests feel more welcome. Restaurants violate the law, as another example, when they pay a male kitchen worker more than a woman because they feel the man is more of a team player.

When Different Pay may be Permitted

Under the New York and California laws, the circumstances in which operators may pay a woman more than a man, or vice versa, for similar work are few and often a stretch to prove. In both states, an employee of one gender may be paid less than someone of the opposite sex if the pay is determined by “a seniority system, a merit system, or a system that measures pay by quantity or quality of production.” In each of these instances, however, the employer must have such a “system” – that is, an objective process that is gender-blind and almost certainly set forth in writing. An informal, unwritten “merit system” on the part of management, for example, is unlikely to withstand an employee’s lawsuit in either New York or California.

The laws as amended leave slim, uphill ground upon which to defend restaurants and restaurant groups in gender pay equity lawsuits.

A catch-all exception is included in both states’ laws. The catch-all permits differentials in pay due to “a bona fide factor other than sex, such as education, training, or experience,” but only if the employer clears several additional hurdles. Management must prove that the pay difference is not “derived from a sex-based differential” in pay. Where, for example, the pay difference is a consequence of the restaurant or group historically paying the men in the kitchen more than women performing similar work, the operator faces a steep challenge in proving the difference isn’t “derived from” a sex-based differential in pay, namely, historical gender bias.

In order to defend successfully based on the catch-all provision, the operator also must prove that the pay difference is a matter of “business necessity” which can’t be satisfied by any other means.

Finally, in order to successfully defend lower pay for a woman than a man on any of the grounds set out above, the restaurant also must prove that the system or factor relied on by management accounts for “the entire wage differential” and that the system has been “applied reasonably.”   

The New York and California laws are now tilted more sharply in the employees’ favor and against employers than ever before.  The laws as amended leave slim, uphill ground upon which to defend restaurants and restaurant groups in gender pay equity lawsuits. 

The Pain of Losing

Where an employer in California loses a Fair Pay Act lawsuit, the employee is awarded as liquidated damages a dollar figure that is twice the wages lost due to the violation.  Given the statute of limitations under the California law, the employee suing may seek two or three years of wage loss, with the longer period applying when the employee proves a willful violation. 

In New York, when the employee prevails, she is awarded three times her wage loss.  

At least in California, employers who lose these lawsuits will also suffer an award of the employee’s attorney’s fees and costs. The attorney’s fees awards will often far exceed the wage loss and liquidated damages awards.

The Key is Prevention

Particularly in light of the recent amendments to the California and New York laws, these lawsuits will become more frequent.  Successfully defending operators will be costly and particularly challenging. 

The key for operators must be to take action now to avoid liability. Key steps include:

• Audit compensation of men vs. women performing similar work, comparing employees within and across position classifications and store locations;
• Where pay differences between male and female employees can’t be adequately justified under applicable law, proactively adjust employee pay as needed;
• Review with counsel all pay-related policies and systems;
• Train all personnel involved in making compensation decisions on the requirements and risks under applicable law;
• Review job descriptions to ensure they’re accurate and current. Evaluate whether the job descriptions in place create any exposure under applicable pay equity law; and,
• Make sure employees have and know of an accessible, effective complaint system within the organization in order to alert management to concerns with pay differences long before employees go to lawyers.

The mandate for pay equity is here like never before. Restaurant operators must attend to the issue before they suffer the first lawsuit.