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Protect Your Business from a Pay-Discrimination Lawsuit with Employment Practices Liability Insurance

In October 2015, Gov. Jerry Brown of California signed one of the strongest anti-discrimination laws in the United States. Titled the California Fair Pay Act, the statute addresses the persistent and pervasive salary gap between men and women that exists both in California and nationwide.

Employment Practices Liability Insurance

Employment Practices Liability Insurance

Title VII of the Civil Rights Act of 1964 prohibits discrimination based on race, color, religion, sex or national origin, and this includes discrimination in pay. Nevertheless, data from 2014 shows that women in California are paid substantially less than men—earning an average 84 cents for every dollar men make. (That number is 78 cents on the dollar nationwide.) That gap is even larger for California’s Latina women, who earn about 44 cents for every dollar that white men make. In all, full-time female employees in the state earn about $34 billion less each year than males.

Changing the Rules on Pay Discrimination

Historically, the courts have viewed gender discrimination pay disputes in very narrow terms. As a rule, women can sue for pay disparities only if they are paid less than similarly qualified male employees who have the same job title and perform the exact same job. Thus, a female housekeeper who cleans rooms in a hotel cannot claim discrimination if a male janitor who cleans the hotel lobby is paid more than she.

Additionally, the courts have not mandated that male and female employees who work for the same company in different locations be paid equally. Thus, a female nurse who works for a large hospital chain can be paid less than a male nurse who performs the same job duties in a hospital 5 miles away. (According to a recent report in the Journal of the American Medical Association, female nurses in the United States are paid an average $11,000 per year less than their male counterparts.)

By contrast, the new statute, which received strong bipartisan support, specifies that men and women must be paid equally for “substantially similar” work.  Said the bill’s author, Sen. Hannah-Beth Jackson (D-Santa Barbara),“Now they’re going to have to value the work equally.”

The law also expressly prohibits employer retaliation against employees who discuss or request information about the wages of other employees.

Legal Experts Predict More Pay Discrimination Lawsuits

The bill, which goes into effect in Jan. 1, 2016, is expected to precipitate an increase in the number of gender-based pay discrimination lawsuits in California, and some legal experts have expressed concern that it will negatively impact the business climate in the state. “If an employer is going to build a new call center, they are just not going to build that in California,” said labor attorney Geoff DeBoskey in a statement to the Los Angeles Times.

In order to prevail in a gender-bias pay-discrimination lawsuit, employers will have to prove that wage differences between men and women are due to factors other than gender, such as merit or seniority, and that they are job-related and reasonable.

Pay Discrimination Lawsuits — 2015

The law comes on the heels of several high-profile gender-related pay discrimination lawsuits filed this year:

  • In September, former Microsoft employee Katie Moussour is sued the tech giant for an undisclosed amount, claiming that she had been paid substantially less than her male counterparts during her seven year tenure at the company. The suit came soon after Microsoft CEO Satya Nadella made his now famous comment that women in the tech world should not ask for a raise, but instead have faith that “the system will actually give you the right raises as you go along.”
  • In March, Chia Hong, a former program manager for Facebook, filed a lawsuit alleging that the company discriminated against and harassed her for three years before firing her in October 2013.
  • Also in March, software engineer Tina Huang requested class action status in a lawsuit against Twitter, claiming that the company’s promotion process gives men an unfair advantage over female employees.

Additionally, in November, uniform manufacturer Cintas Corp. agreed to pay $1.5 million to settle a   class action sexual discrimination lawsuit for failing to hire qualified female applicants for sales jobs between 1999 and 2005. The suit was filed by the Equal Employment Opportunity Commission.

Earlier this year, Unit Drilling, an oil-drilling company based in Oklahoma, paid $400,000 in damages and other associated costs to settle an EEOC suit filed on behalf of five women who were denied employment based on their sex. According to the EEOC, the company systemically discriminated against women because they were “too pretty” and their presence would “distract the men.”

If asked, most employers would state that they treat female employees with the same respect and consideration as they do men. Yet, according to U.S. Census Bureau data and other independent research, pay inequality is a reality that occurs in the most forward-thinking firms. That’s why every business owner needs employment practices liability insurance, which protects the company in the event it is sued for:

  • Discrimination
  • Wrongful termination
  • Failure to employ or promote
  • Wrongful infliction of emotional distress
  • Sexual harassment
  • Breach of contract
  • Unfair evaluation of an employees
  • Deprivation of a career opportunity

Don’t wait until you find yourself on the wrong end of a pay discrimination lawsuit to act. Contact one of our business insurance experts to discuss employment practices liability insurance today. We are available to take your call at 516-292-3780 Monday through Friday from 9 a.m. to 6 p.m. Or request a free consultation online now.


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Floyd Arthur

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