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Equal Pay Act: Definition and Effects

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  • 0:05 Equal Pay Act Defined
  • 1:06 General Rule and Factors
  • 3:25 Equal Pay - Still a Gap
  • 4:16 Enforcement
  • 4:56 Lesson Summary
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Lesson Transcript
Instructor: Shawn Grimsley
Women have made huge strides in the working world in recent decades. However, there is still a problem of unequal pay. In this lesson, you'll learn about the Equal Pay Act and its key provisions. A short quiz follows the lesson.

Equal Pay Act Defined

Tiffany just got a promotion landing her in the executive suite. She's proud that she's busted through the glass ceiling but has been pulled aside by one of her fellow female executives who tells her to carefully review her compensation package. Tiffany asks why and is told that the company has a history of not paying women as much as men who hold the same position. Her new friend, Alice, invites her to lunch to discuss.

After placing their orders, Alice tells Tiffany that it's actually against the law for most businesses to pay women less for the same work. The Equal Pay Act of 1963 (EPA) requires that an employer pay male and female employees equal pay for equal work. Employers cannot engage in pay discrimination based on gender. Pay includes not only salary, wages and overtime, but also bonuses, stock options, profit sharing, vacation and holiday pay, reimbursement for travel, life insurance and other benefits.

General Rule and Factors

According to the Equal Employment Opportunity Commission, '...the EPA provides that employers may not pay unequal wages to men and women who perform jobs that require substantially equal skill, effort and responsibility, and that are performed under similar working conditions within the same establishment.' Tiffany asks for more details, and Alice explains that you can break the rule down into several factors.

1. Do the jobs require the same level of skills?

It's the skills related to the job that count, not the skills of each respective employee. An assistant store manager at a fast food restaurant with a PhD in quantum physics may be more skilled because of his or her education, but the PhD is not relevant to managing a burger joint.

2. Do the jobs require the same level of physical or mental effort?

Basically, are they doing the same work to the same extent? If one person's job requires an additional task or a more physically or mentally difficult task, an increase in pay may be justified.

3. Do the jobs require the same general level of responsibility?

Minor differences are irrelevant and can't be used as a pretext to discriminate in pay. For example, an employee who has to turn off the coffee pot at the end of the day doesn't have any more real responsibility than anyone else.

4. Do the jobs have the same basic type of working conditions?

You can break working conditions down to physical surroundings and hazards.

5. The prohibition against pay discrimination generally only applies to people in the same establishment.

An establishment is a distinct physical place of business. For example, people employed by the business in its New York office may be paid more than people employed in its Denver office.

Keep in mind that not all pay discrimination is illegal. According to the EEOC, there can be pay differentials between male and female employees if it is based on some legitimate factor, such as 'seniority, merit, quantity or quality of production or a factor other than sex.'

Equal Pay - Still a Gap

Tiffany thanks Alice for the information but doesn't quite believe there is a problem today. It is the 21st century after all, and the law has been on the books for 50 years. Alice tells her that women are still behind in pay. In fact, Alice tells her a report published by the White House's Equal Pay Task Force found that women still lag behind men in pay to a significant degree.

On the positive side, progress has been made. In 1963, when the EPA was enacted, women only earned about an average of 59.8% of the pay men received for the same work. In 2013, women earned an average of 77% of what men earned in comparable positions. That's about a 17% improvement, but women are still not receiving equal pay for equal work.

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