Hunton Employment & Labor Perspectives

Recently-introduced federal legislation could have a significant impact on equal pay class actions. On January 30, 2019, Democratic legislators reintroduced the Paycheck Fairness Act (H.R.7), which provides for various changes to the Equal Pay Act of 1963 (“EPA”).  Earlier versions of this bill, which was originally introduced in 1997, have all died in Congress. However, on February 26, 2019, the House Committee on Education and Labor voted in favor of H.R.7, which means the legislation will now be presented to the full House for a vote.

Some key features of the newly-proposed legislation include:

• Expansion of Potential Class Size: H.R.7’s class action mechanism incorporates Federal Rule of Civil Procedure 23. Under the current mechanism set forth in Section 216(b) of the Fair Labor Standards Act, which applies to claims under the EPA, any interested parties must file a consent in order to “opt-in” to the case. If they fail to do so, they do not become part of the action. In contrast, under the proposed legislation, all class members will be included in the Rule 23 class action once the plaintiff meets the Rule’s standards for certification. Any class members who do not wish to be included must opt-out. The proposed change from an “opt-in” class action to an “opt-out” class action would significantly expand the class size in equal pay class actions.
• Heightened Burden on Employers to Explain Pay Difference: Currently, the EPA requires employers to show that any pay disparity between opposite genders is due to a bona-fide factor other than sex. H.R.7 provides that the defense only applies if employers can show that the wage difference is not sex-based and is instead job-related and consistent with business necessity.  The employer must also establish that the explanation for the wage differential explains 100% of the pay differential and that there is no alternative employment practice that would have addressed the same business necessity.
• Expansion of Geographical Limits: The EPA allows plaintiffs to point to wage differences between employees working in the “same establishment.” H.R.7 expands the definition of “same establishment” as workplaces for the same employer that are located within the same county or political subdivision of a state. This means that employees working in separate work locations could be appropriate comparators for establishing pay disparities between employees of different genders.
• Increased Penalties: Punitive damages are available under H.R.7 if the employee demonstrates that the employer acted with malice or reckless indifference as to the pay differential. Additionally, H.R.7 allows for unlimited compensatory damages. Currently, the EPA allows for backpay for wages not properly paid and up to the same amount in liquidated damages, and reasonable attorneys’ fees.

If enacted, these proposed changes could significantly alter the dynamic of Equal Pay Act class actions and their attractiveness to plaintiff’s lawyers. From a litigation standpoint, the most impactful change would be the revision to the class action procedures. If H.R.7 becomes law, class actions that are brought under the EPA will become “opt-out” class actions, not “opt-in.” As a result, class sizes in EPA class actions will increase.  The increased class size, coupled with the potential for greater damages, could lead to an increase in the number of equal pay class actions filed.

It remains to be seen whether H.R.7 will meet a similar fate to prior EPA amendment proposals or whether the newly-proposed legislation can garner sufficient support in Congress.  The fact that H.R.7 has made it out of Committee and will be voted on by the full House suggests that the legislation has more support than prior versions.  Regardless, the proposed legislation reinforces the importance of employers proactively reviewing their compensation practices to ensure that any pay disparities between similarly-situated employees of different genders are supported by legitimate, non-discriminatory business factors.