What Business Owners and Managers Need to Know About Gender Discrimination, Equal Pay and Sexual Orientation Lawsuits

Date: October 11, 2016

A growing number of jurisdictions are enacting new Equal Pay Laws, as well as explicitly adding protections gay, lesbian, bi-sexual and transgender individuals. Accordingly, it’s very important to avoid any inference of discrimination on the basis of sex, or an individual’s divergence from sexual norms. It is essential to remember managers have a heightened responsibility not only to act fairly in their own dealings with subordinates, but to preempt or otherwise put an end to any form of harassment against individuals within protected classes. That’s essential if you want to avoid the pain—and the devastating expense—of a lawsuit; however, it’s also just good practice to encourage civility in the workplace as a means of promoting workplace harmony and goodwill.

Is Sexual Orientation Protected under Title VII?

The Equal Employment Opportunities Commission (EEOC) enforces federal anti-discrimination laws—including Title VII of the Civil Rights Act, which prohibits discrimination against certain protected classes. Title VII protects against discrimination on the basis of race, color, nationality, religion and sex. Other federal laws also prohibit discrimination on the basis of age (i.e., over 40), pregnancy, citizenship, familial status, veteran status, and or disability. Missing from this list of protected classes is any explicit mention of sexual orientation. Accordingly, some have viewed EEOC’s recent spate of lawsuits—suing employers over alleged discrimination against homosexuals—as controversial. Be that as it may, EEOC’s enforcement actions are not at all surprising.

Twenty-two states, and the District of Columbia, have already enacted laws explicitly prohibiting discrimination on the basis of sexual orientation, and that number will only grow. Additionally, many local or municipal laws, authorize suits for this form of discrimination. But on top of that, we now see signs that the federal courts may be (somewhat) softening their once firm view that Title VII does not protect against discrimination on the basis of sexual orientation. 

The Seventh Circuit’s recent decision in Hively v. Ivy Tech Community College is illustrative. While on the one hand the Court reaffirmed longstanding precedent that Title VII does not prohibit discrimination on the basis of sexual orientation, the Court went on to pronounce a major exception—one that might arguably swallow the rule. The Court emphasized that when Title VII prohibited discrimination on the basis of “sex,” the Civil Rights Act was meant to imply “that it is unlawful to discriminate against women because they are women and against men because they are men.” As such, the Court reasoned that an employee might legitimately raise a Title VII claim for sex discrimination against an employer where he or she has been allegedly discriminated against on account of his or her failure to abide by societal expectations and norms. Or as EEOC argued in a recent filing: “[S]exual orientation discrimination is sex discrimination because it necessarily entails treating an employee less favorably because of the employee’s sex.” 

The Seventh Circuit acknowledged that in practice it’s very difficult to distinguish between a claim that an employee has been treated differently on the basis of sexual orientation and a claim that the employee has been discriminated against on the basis of “gender stereotypes.” “[A]lmost all discrimination on the basis of sexual orientation can be traced back to some form of discrimination on the basis of gender non-conformity.” This is most apparent in cases where, for example, a gay man is discriminated against for “fail[ing] to meet expected gender norms by dressing in a manner considered too effeminate for men, by displaying stereotypical feminine mannerisms and behaviors, by having stereotypical feminine interests, or failing to meet the stereotypes of the rough and tumble man.”

But EEOC’s rationale might just as well extend in cases where the employee “display[s] no physical or cosmetic signs of [his or her] sexual orientation . . . [but] . . . nevertheless fail[s] to conform to gender norm expectations in their attraction to partners of the same sex.” Thus employers should be on notice that EEOC’s theory of Title VII sex discrimination effectively prohibits all forms of discrimination on the basis of gender identification or sexual orientation. So regardless of what jurisdiction your business operates, it’s prudent to avoid any inference of discrimination. To be sure, it’s always better to avoid such dangerous legal waters because—even if there may be a defense—lawsuits are horrendously expensive. 

What about Pay Disparities? 

Given that Title VII prohibits all forms of sex discrimination, employers are also walking on thin ice to the extent that there is any unexplained pay disparity between men and women in the workplace. What is more, the federal Equal Pay Act of 1963 explicitly prohibits discrimination in pay, permitting pay differentials only to the extent justified by legitimate business reasons including: “(i) a seniority system; (ii) a merit system; (iii) a system which measures earnings by quantity or quality of production; or (iv) a differential based on any other factor other than sex.” Nonetheless, a half-century later the Bureau of Labor Statistics reports that there is still a significant wage gap between men and women.

Accordingly, in an effort to close this wage gap, many states have enacted more aggressive Equal Pay laws. If you are wondering what standard applies in your state, you should check-out this guidance from the National Conference on State Legislatures. Remember that federal law remains the baseline, unless your state has enacted more stringent standards. And of course, California is widely acknowledged as having the most stringent Equal Pay law in the nation. So we’ve put together this guidance for small business owners in California, which we recommend reviewing—in addition to seeking out legal counsel—if you have concerns as to whether your business complies.

But even on the heels of enacting the toughest Equal Pay law in the nation in 2015, the California Legislature apparently saw the need to add more teeth to its Equal Pay law with amendments this term. The 2016 amendments explicitly prohibit employers from justifying current pay disparities on the basis of historic pay structures. And this appears to further raise the burden of proof for employers seeking to prove that they had legitimate (non-sex related) business justifications for pay disparities. 

Elsewhere, employers should be aware that other states are beginning to use California’s Equal Pay law as a model for their own reforms. For example, Maryland recently enacted amendments, closely tracking the California model in broadening protections provided by its Equal Pay statute—including in prohibiting employers from adopting policies to explicitly discourage employees from discussing their wages. Maryland also now loosely follows California’s model in clarifying that a wage discrimination claim may be based on wages paid to employees working in different locations, and in placing a heightened burden on employers to justify—100%—any pay disparity whatsoever.     

Employers should know that they face the possibility of steep fines, and serious liabilities if an employee should bring a suit alleging pay disparity. For example, in Maryland an employee is entitled not only to obtain an injunction ordering the employer to change its practices, but also actual damages and liquidated damages (i.e., double “actual damages”). And lest there be any confusion on the matter, Maryland’s amendments also prohibit any form of discrimination on the basis of gender identity—which is likewise arguably prohibited under other Equal Pay laws, but not explicitly in most cases.

The attorneys at Hyatt Webber, PA in Annapolis, Maryland provide additional guidance on Maryland’s new amendment’s here, as well further guidance on sexual orientation discrimination claims here. Also, California employers may find further guidance on California’s Equal Pay law here.

*This article does not provide legal advice. Employers are advised to retain counsel from a trusted attorney with experience in employment law.  

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