Federal Court Holds Poor Economy Does Not Justify Pay Disparity

The U.S. Court of Appeals for the Eighth Circuit held that the trial court properly instructed a jury that the employer could not rely on poor economic conditions as a justification for pay discrepancies between female and male employees.

Under the Equal Pay Act, an employer may establish an affirmative defense to a claim of sex-based wage discrimination by showing that the pay difference is “based on any other factor other than sex.” In Dindinger v. Allsteel, Inc., the employer defended itself from claims that the female plaintiffs were paid less than their male colleagues by arguing that it was because of negative economic conditions arising from the economic recession that began in 2008, which resulted in multiple rounds of lay-offs, restructuring of job responsibilities, and the freezing of merit-based pay increases. The Eighth Circuit held, however, that this did not justify the pay differential – that these circumstances “did not cause the plaintiffs to be paid less than their male comparators, but merely held pre-existing wage differentials in place.”

Thus, if sex-based wage discrepancies are discovered, employers should be aware that poor economic conditions will not serve as a justification for the original discrepancy, and likely will not be a viable reason for failing to address the continuing discrepancy.