The Market Defense Sharon Rabin Margalioth



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From a normative policy perspective, Ayers may be right that the “business necessity” defense should be scrutinized more closely to ascertain what type of profitability argument the employer is promoting. When the employer is claiming the market enables him to extract a larger share of the contractual surplus from one group of employees than from another for the same work (in our case – extracting more from women on average than from men) this should fall outside the boundaries of a business necessity defense. Regrettably, this approach has yet to be implemented in Title VII disparate impact litigation, where it is quite clear that profit-enhancement justifications are treated with deference. Nonetheless, as I discuss in section IV.D Ayers’s distinctions are easier to implement in the EPA framework.
Summarizing my concerns about the prospects of disparate impact law to serve as a gate keeper against employer market based justifications of gender pay disparity: disparate impact law requires the analysis of statistical data to establish the correlation between specific employment practices and wage levels across gender lines. The law requires the data be firm specific, necessitating both expertise and resources, which make such an analysis economically infeasible in many cases brought by individuals. Even if the initial burden of demonstrating statistical disparate impact is met, courts often defer to employers’ explanations of business needs and profit maximizing behavior, which fall neatly within current interpretation of the business necessity defense. Lurking in the background, are at least two remarks by the Supreme Court that disparate impact analysis is unavailable in gender wage discrimination cases.

IV. The Partial Causation Model for Wage Discrimination Claims
A. Initial Justification for a Partial Causation Model
Embedded in Title VII theory of discrimination is a causal link between group membership and adverse treatment of group members.100 This concept of discrimination impedes the ability to combat discrimination when such causation is unverifiable or too complex. Ascertaining which factors contribute to disparity in compensation between two similarly situated employees is one such case. Absent direct evidence that the employer intentionally took gender into consideration when setting wages (the Corning Glass scenario), and especially if the employer insists that market constraints or opportunities warranted paying one employee who happened to be male more than his female colleague, the causation model is of limited use. In theory, resorting to disparate impact analysis, we can go about weeding out which factors correlate with gender and thus meet the causation requirement, but in practice this is usually impossible.
Sex discrimination is treating people differently on the basis of their gender. The causation model opts to prove discrimination by requiring the plaintiff to present evidence of causation – how the prohibited factor (sex) directly or indirectly affected the decision. The model emphasizes the need to show how the irrelevant factor, gender, found its way into the decision-making process.
Another way to define gender discrimination is by focusing on whether the employer has used relevant factors in setting pay. The policymaker identifies the range of pertinent factors for determining compensation. Any wage disparity between men and women that cannot be explained by one or more of these legitimate factors is deemed as a matter of law a manifestation of gender discrimination. One way to legally formulate this concept of discrimination is to institute an irrebutable presumption of discrimination when an employer cannot offer an explanation which meets one of those authorized reasons. Any other basis for the disparity, if not on the list of qualified explanations, is rejected and the fact finder must conclude that sex discrimination has tainted the decision-making process. The difference between the two frameworks can be articulated as follows: the traditional model is formulated as a negative command “sex is an irrelevant factor”. It permits broad discretion; allowing the decision maker to base his decision on infinite grounds, restricted only by gender based decisions. The proposed model is structured around a positive command “you can base your decision only on an authorized list of factors”.
Application of the market defense to these two frameworks can exemplify their divergence. In the traditional framework the market argument aims to show that the employer based his decision on some factor other than sex. The relevance of that other factor is not closely scrutinized. Under the proposed model, the market explanation must be examined to see whether it falls within the scope of the relevant factors. The defense will only be established if it is determined that the specifics of the market justification are in fact relevant to wage determination. Under this regime the ability to justify wage disparities with market based arguments is bounded by a relevancy test.
The traditional model of defining discrimination by irrelevant factors has at least three strong justifications. First, it safeguards the actor’s freedom. Restrictions are placed on the employer only in the prohibited zone, any other motivations; frivolous or irrational are not subject to review. Second, it is assumed that it is an easier task to identify what are the wrong reasons to reach a certain decision, than to compile a complete list of the “good reasons”. The risk of making an error is higher when we are required to compile a conclusive list of relevant inputs than when we are only committed to make sure that the factors on our “bad list” are indeed irrelevant and socially harmful. The possibility that there are additional unidentified harmful motives does not derogate the task, since the focus is on particular wrongs – making sure that those already identified are regulated. Later the list of irrelevant factors can be expanded, as was the experience with employment anti-discrimination mandates, expanding its reach from the initial five core categories of race, color, religion, sex and national origin to issues such as age based discrimination, disability and pregnancy. Lastly, if our objective is to combat discrimination, especially discrimination based on group membership, the negative definition framework seems to provide a natural fit. It accomplishes what it set out to do: weeding out only practices or decisions that are based on group membership. On the other hand, following the relevant factor list may result in interfering with decisions that are not motivated or affected by group membership considerations.
The relevant-factor definition of discrimination has its advantages too. Assuming we want to control only decisions based on group membership, turning to this definition may advance this goal. When the decision-making process is complex and based on multiple factors, or subjective decentralized evaluations, filtering it through a comprehensive checklist of authorized factors may prove beneficial.101 The traditional model raises the question whether group membership played a role in decision-making, but the answer in many cases is usually inconclusive. We don’t know, and therefore our understanding is that the plaintiff’s burden of persuasion has not been met. The law has developed evidentiary presumptions and tools to aid a plaintiff in meeting his causation burden. Both disparate treatment law and disparate impact law have moved in this direction.102 But at the end of the day, as the market defense has proven all too well, the causation requirement effectively precludes liability in these complex multi-component cases, enabling employers to evade liability in some cases where causation to group membership is present, but cannot be isolated and verified among the myriad of factors contributing to the decision. On the other hand, the relevant-factors approach keeps things simple. Once the decision maker fails to show that he was guided by the authorizing factors, he is liable. Liability attaches even in cases in which he can point to other factors, not on the list, which have no known statistical correlation with membership in the protected group.

Applying the traditional model will result in false negatives. Some decisions are sanctioned although they are based on group membership, in the disparate treatment or disparate impact sense. Causation may exist in fact but not be detected due to information and verification problems or the complexity of the causal link between some factors known to affect the decision and membership in the protected group. Turning to the positive definition model will lead to false positives. Some decisions will be deemed discriminatory, since the decision-maker relied on factors not on the affirmative list, but these factors have no underlying causal links to membership in the protected group.103 Given that both models have their costs, the question is which is ultimately more beneficial.


As a starting point one should always turn to the traditional model. But in cases where there is growing confirmation of its failure to identify discrimination, serious consideration should be given to switching to the relevant-factors model. In other words, if there is suspicion that too many false negatives are occurring, the traditional model is ineffective in achieving its goal of eliminating group-based discrimination. The second qualification for considering the relevant-factors model is the confidence that a policymaker has in its ability to identify many pertinent factors. If the affirmative list is comprised of the majority of appropriate grounds, this decreases the chance that there will be false positive determinations of discrimination.
The endeavor to eliminate the gender wage gap is an area of discrimination law where we should start questioning the effectiveness of the traditional model. The gender wage gap remains a persistent barrier to sex equality in the workplace. The average earnings of women working full time is still around twenty percent less than the average earnings of men holding a full time job.104 The wage gap has not diminished in any meaningful way in the past decade.105 Section II outlined circumstances where the causation model failed to identify gender based compensation schemes. The failure was not due to a lack of understanding of how to apply the causation model. The failure was imminent due to the structural constraints of the traditional framework. Given the complexity of how gender and sex correlate with other social factors such as negotiation skills, mobility, career expectations, social norms and various other issues we have not even begun to think about, the causation model lets too many of these factors escape meaningful review. The result is too many false negatives, errors that keep feeding the gender wage gap.
Implementing the relevant-factors model cannot solely be based on a high rate of false negatives. Equally important is consideration of whether policymakers are capable of ascertaining the appropriate factors. This is an essential prerequisite, needed to ensure that unnecessary or unfair restrictions are not placed on the decision maker’s discretion. Compensation determinations meet this perquisite. We can ascertain that compensation should somehow correlate with the job or task being preformed and individual productivity. We can state that employees performing the same job, under similar conditions, with equal productivity should be compensated similarly. How we classify the “sameness” of jobs or working conditions and how to exactly measure productivity is debatable. But this is an issue where we have an initial agreement of what are the relevant factors.106

B. Is The Equal Pay Act a Partial Causation Model?

The Equal Pay Act consists of two parts. The first part, the prima facie case (PFC), sets out the criteria for determining which jobs are deemed equal and warrant equal pay to employees of opposite genders. The PFC elements are that an employer pays (1) different wages (2) within the same establishment (3) to employees of opposing sexes (4) for equal work on jobs that require equal skill, effort and responsibility and which are preformed under similar working conditions. The second part of the EPA lists the four affirmative defenses: “(i) a seniority system; (ii) a merit system, (iii) a system which measures earnings by quantity or production or (iv) a differential based on any other factor other than sex.” Once the plaintiff establishes her PFC, the burden of persuasion shifts to the defendant employer to show the disparity is caused by one of the four affirmative defenses.107


The PFC fourth element focuses on general attributes of the jobs compared, making sure that the positions are “equal” in essence, requiring equal skill effort and responsibility and performed under similar working conditions. It is the plaintiff’s burden to present the case for this general equivalence. The affirmative defense shifts the focus to individual differences between two or more people performing “equal work”. Basically what the employer is arguing, when raising one of the four affirmative defenses, is that although the plaintiff and the comparator (the individual whom the plaintiff is comparing herself to) are performing the same job, they are not entitled to equal compensation due to differences in their individual performance or work history. Seniority, merit and quantity based earnings all relate to individual attributes of specific individuals.
The PFC of the EPA certainly deviates from the causation model. A plaintiff neither has to show that the employer took into account her sex when determining compensation, nor does she has to demonstrate the disparate impact of the employer’s practice on women as a group. The omission of causation in the PFC makes the EPA accessible to individual employees. One does not need extraordinary resources to argue, “I am performing the same job, in the same establishment, but being paid less than comparable men”. The plaintiff does not have to offer any theory or evidence of causation between her sex and her lower compensation. She just has to present factual evidence that she is being paid less than a male co-worker performing the same job. The PFC stage relies on a relevancy test only. It takes pain to detail the relevant factors such as working in the same establishment, equal work, equal skill, effort and responsibility, and work under the same working conditions. All these factors are related to productivity. Making sure that the plaintiff and the comparator are performing jobs that have the potential of generating the same productivity is central in modeling employer decision-making.
The affirmative defense stage turns to the issue of individual productivity. If the plaintiff is successful in meeting her burden of persuasion to show the jobs are potentially equal (can generate the same output from the employer’s perspective), the employer can argue that pay differentials are due to individual variations in the performance of the plaintiff and the comparator. The three specific affirmative defenses authorize pay systems based on seniority, merit, or production. All three reference factors that proxy individual productivity. It is assumed that more experience (seniority), more training or credentials (merit) and contributing more production (production) enhance an individual’s productivity. These three defenses fall squarely in the relevancy model, encompassing factors that are relevant to pay variations.
The fourth defense, “any other factor other than sex” (AFOTS), poses a serious challenge to my argument that the EPA is a partial causation model of discrimination. The AFOTS defense uses language associated with the causation model. “Any other factor other than sex”, sounds equivalent to a mandate prohibiting only decisions that are driven by sex-based motivations. It suggests that any non-sex based factor is an acceptable justification for gender wage disparity. I think that normatively (if not linguistically) this is a wrong reading of the AFOTS defense. If any factor other than sex could justify pay disparity, this would make the three specific defenses redundant. Why mention merit, seniority or individual production if all three fall in the catchall exemption of “any other factor”? A better interpretation of AFOTS is that the catchall exemption references only to explanations that correlate with productivity, as long as they are not tainted by intentional sex discrimination. If AFOTS is interpreted in this limited fashion, the EPA is an application of the partial causation model of discrimination. It does not require the plaintiff to demonstrate causation between her sex and lower compensation, and it does not relieve an employer of liability by severing causation between sex and compensation. Looking at the mandate as a whole it can be summarized as requiring the employer to pay equally productive workers of opposite sex, performing the same job, equal pay. Whenever an employer deviates from this mandate he is deemed discriminatory, even if there is no indication that he was motivated by sex based considerations or that the factors he relied on adversely impact women as a group.

C. Why Was The Equal Pay Act Interpreted as a Causation Model?
EPA jurisprudence has not indicated any willingness to deviate from the traditional understanding of what constitutes sex discrimination and the centrality of the causation model. This can be displayed by the treatment of the market defense. A conflict among the Circuits exists with regards to the proper contours of the catchall affirmative defense, “any factor other than sex” (AFOTS). The Supreme Court has resisted settling this conflict.108
In the conservative camp the Eighth Circuit led the way in Strecker v. Grand Forks County Social Service Board109, holding that any determination by an employer that he established a neutral pay system qualifies as “any other factor other than sex”110. The Seventh Circuit followed suit in Wernsing v. Department of Human Services,111 where a female employee challenged the practice of basing compensation on previous salaries of lateral hiring because it resulted in substantially different pay for male and female employees. The Seventh Circuit stated that the EPA only “asks whether the employer has a reason other than sex-- not whether it has a “good” reason.”112
The broad interpretation of the AFOTS defense transforms the EPA into a disparate treatment only model of discrimination (not allowing consideration of disparate impact).113 Since the employer can justify his pay decisions by any non-sex factor, endeavors like those of the plaintiff in Wernsing to show how the challenged practice affected women’s compensation are futile. The EPA under this interpretation regulates only intentional sex based compensation decisions. The Eight and Seventh Circuits' reading of the EPA, especially the AFOTS defense, leave no doubt that they did not acknowledge any innovative understanding of what are unlawful wage practices. This understanding is grounded deep within the causation model, limited to conventional intentional disparate treatment.
Other Circuits are more open-minded about scrutinizing employers’ market based explanation for wage disparity. Probably the most cited example is the Ninth Circuit decision in Kouba v. Allstate Insurance Co.114In that case the plaintiff argued that her employer’s practice of using prior salaries to determine compensation was discriminatory, because it resulted in the average female sales agent being paid less than her average male counterpart. When considering possible interpretations to the AFOTS defense the court rejected the two extreme options: one that would enable the employer to evade liability by showing he relied on any factor other than the employee’s sex. This interpretation was dismissed since employers can manipulate factors having close correlation to gender. The second interpretation rejected is one that would deny employers the opportunity to use acceptable factors, if it perpetuates historic sex discrimination: “The statutory exemption of training and experience that may reflect opportunities denied to women in the past makes clear that congress did not intend to go so far as to prohibit all factors that may be subject to the perpetuation of discrimination effect”.115 Instead the court required that the employer show that the pay system was based on an "acceptable business reason".116 The Sixth Circuit also incorporated the "acceptable business reason" limitation into the AFOTS defense. In EEOC v. J.C Penney Co.117 it reasoned, “The “factor other than sex” defense does not include literally any other factor, but a factor that at a minimum, was adopted for a legitimate business reason”.118 The Eleventh Circuit followed suit in Glenn v. General Motors Corp.119 adopting the reasonable business reason standard when reviewing the employer’s explanation that to encourage people to move out of hourly wage jobs into salaried tracks, it established a policy against requiring an employee to take a cut in pay, and that this policy, and not the sex of the employees, was the cause of the pay disparity between men and women. Rejecting this explanation the court stated that “the legislative history thus indicates that the "factor other than sex" exception applies when the disparity results from unique characteristics of the same job; from an individual's experience, training, or ability; or from special exigent circumstances connected with the business. The pay disparity at issue here does not result from any of these reasons.” 120 Finally, the Second Circuit in Aldrich v. Central School District121 asserted that “we believe that Congress specifically rejected blanket assertions of facially-neutral job classification systems as valid factor-other-than-sex defenses to EPA claims.”122 It required the employer to prove that a bona fide business-related reason exists for the gender neutral factor that resulted in wage differentials.123
The “acceptable business reason” limitation of the AFOTS defense does not convert the EPA into a partial causation model of sex discrimination. The line of decisions which require the employer to offer an acceptable business reason for his pay practices simply incorporate a variance of disparate impact into the EPA,124 in contrast to the more conservative Circuits which permit only disparate treatment type claims. In essence what the courts are saying is that in cases where the plaintiff meets her PFC, we require the employer to explain why his pay scheme, which resulted in the plaintiff being paid less than her male co-workers for equal work, is sound from a business perspective. In spirit, this is analogous to the “business necessity” defense. The acceptable business reason standard leaves employers with more latitude than the business necessity standard which is constrained by the accumulative requirements of showing both job relatedness to the position in question and business necessity. It is hard to envision the “acceptable business reason” standard as invigorating a relevancy based model of discrimination because it requires only cursory review of the business soundness of pay practices resulting in lower wages for women workers, without further guidance that these justifications must relate only to productivity concerns.
Why are the courts resisting the partial causation model? First and foremost any relevancy based theory of discrimination is antithetical to the historical and cultural basis of employment discrimination law in the United States. If jurists, litigators and judges are educated and trained to conceptualize discrimination only as basing decisions on prohibited factors such as race or sex it is extremely difficult to make the mental leap to the relevancy definition, where you ask whether the decision was based only on relevant factors. It is inevitable that with this indoctrination the disposition is to construct the EPA as a traditional antidiscrimination mandate. But there are also at least three linguistic foundations within the language of both the EPA and Title VII that may have played a contributing role to this interpretation.
First, the AFOTS defense, whether you apply a broad or narrow interpretation, uses language associated with the causation model. It suggests that any non-sex based factor is an acceptable justification for gender wage disparity. This linguistic reading certainly influenced the Seventh and Eight Circuit understanding of AFOTS. The Bennett Amendment also contributes to the application of the causation model within the EPA. Although merely a coordination clause, which objective was to clarify that employment practices authorized by the EPA shall not be considered a violation of Title VII, the Bennett Amendment was implicitly comprehended as bridging between the two statutes, and partially unifying them to one body of law with respect to sex based compensation discrimination.125 If the two statutes are interrelated, than one theory of discrimination, the causation, should govern them both. This conclusion is not warranted by the Bennett Amendment. It is a one-way coordination clause, restricting only Title VII by the EPA and not vise versa. Actually if the premise is that the EPA and Title VII are virtually the same, there would be no need for a coordination clause. It is only when we recognize existing differences between the theory and elements of liability that a coordination mechanism is meaningful. The last linguistic hint of a causation model is the opening proviso of the EPA: “No employer shall discriminate… on the basis of sex”. This language could also be understood as embracing the Title VII causation model. The proviso, however, should not be interpreted as an endorsement of the causation model. The following sentence, the substantive part of the EPA, immediately explains what it means in the context of the EPA to discriminate in terms of pay on the basis of sex, resorting to the relevancy model. The proviso is simply a term that is followed by its definition.
Normative considerations are also important. Parting from the causation model in favor of a relevancy test carries with it hefty limitations on managerial discretion in setting individual wage rates. It is feared that it will result in the elimination of differential pay altogether, as employers will constantly worry about employees coming forward with claims of pay inequality. Under a relevancy test the burden to justify the pay scheme is substantially heavier than under the irrelevancy test, where you simply have to convince the fact finder that sex considerations did not taint your decision-making process. The conflict among the circuit courts about the interpretation of the AFOTS defense can be explained by discrepancy among the circuits on the latitude employers should have in constructing their pay schemes. The conservative camp shields employers from any intervention with managerial discretion beyond intentionally sex based decisions, while Kouba and its progeny place some restrictions, but only on the outskirts. Shifting to a partial causation model is taking a significant step forward in regulatory intervention, since any justification is screened against a strict productivity enhancing criteria. It should be clear that even under the strict standard there is still ample room for individual differentiation (based on productivity considerations).

D. Can the Partial Causation Model be Resurrected within the Equal Pay Act?
Absent legislative amendments clarifying the structure of the EPA by highlighting the foundational differences from Title VII jurisprudence, it is unlikely the relevancy based model of discrimination will be implemented. As illustrated, all of the Federal circuits that have interpreted the EPA AFOTS defense share an implicit understanding that causation is the core issue of liability. Nonetheless, I think that one can build on the existing “acceptable business reason” advanced in Kouba and its progeny to emulate a paradigm that operates fairly similar to the relevancy test. Although the theoretical foundation will be lacking, the end result would be satisfactory.
The “acceptable business reason” is a standard of review that scrutinizes the employer’s explanation for wage disparities. It currently provides employers considerable leeway, only ensuring that the employer’s explanation is not hiding traditional sex discrimination. A similar outcome to fully implementing a relevancy test can be achieved by heightening scrutiny on employers, requiring them to detail and substantiate their claims with facts and data supporting the contention that productivity enhancement is the underlying basis for the pay disparity.
Here we can draw on Ayers proposal to distinguish between general profitability claims and specific claims pertaining to productivity.126 I have questioned the prospect of applying this important insight to Title VII “business necessity” defense, but I am more optimistic of implementing it through the EPA AFOTS defense. Title VII is more of a market driven statute than the EPA. The EPA is incorporated into the Fair Labor Standard Act of 1938 (FLSA).127 The central purpose of the FLSA is to secure minimum wage and overtime pay to covered employees, and to place restrictions on child labor. All these are anti-market measures. Regulating minimum wage, over time and child labor all spur from an ideology that sometimes market outcomes are either inefficient or inequitable, even if they enhance profitability. The FLSA is all about regulating market pressures and the quest of employers to extract profits. In this statutory environment it is easier to explain why not all profit maximizing behavior should be authorized. It is thus feasible to apply Ayers’ distinction between profits sustained through depressing wages of one group of employees (not an acceptable business reason) and profits gained through applying a policy that increases productivity, which is acceptable.
To summary how the EPA can be salvaged: Meeting the PFC will require the employer to provide a productivity rationale for his general compensation system or for specific productivity variance between the plaintiff and her comparator. The failure to offer productivity related rationales will give rise, as a matter of law, to an irrebuttable presumption that the disparity is “because of sex”. This framework preserves the causation model as the theoretical foundation of the EPA, but for all practical matters relieves the plaintiff of the need to point to causation either through disparate treatment or disparate impact analysis. Under this proposal, carrying the burden of the EPA prima facie case will establish a substantially stronger inference of discrimination than under Title VII discrimination claims.

E. The Paycheck Fairness Act
The best prospect for implementing a partial causation model within the EPA is the Paycheck Fairness Act128. The bill is an amendment to the EPA, and is currently pending in the Senate after passing in Congress. Section 3 revises the AFOTS defense by limiting its application only to “differential based on a bona fide factor other than sex, such as education, training, or experience”. The bona fide factor defense applies only if the employer demonstrates that such a factor: (i) is not based upon or derived from a sex-based differential in compensation; (ii) is job-related with respect to the position in question; and (iii) is consistent with business necessity. The defense does not apply where the employee demonstrates that: (1) an alternative employment practice exists that would serve the same business purpose without producing such differential and (2) the employer has refused to adopt such alternative practice.
The Paycheck Fairness Act includes other important provisions such as expanded retaliation protection that covers inquires and disclosure of information about wages129; strengthened remedies by including compensatory and punitive damages130; requiring the EEOC to provide training on issues pertaining wage discrimination131; authorizing the Secretary of Labor to make grants to programs providing negotiations skill training for girls and women and to conduct studies and provide information regarding the means available to eliminate pay disparities between men and women132.
This bill addresses many of the barriers to gender pay equality discussed in this Article, including the significant impact of lack of information and negotiation skills on the wages of women. The new catchall exception is substantially narrower. First, it applies only to a bona fide factor.133 Second, examples follow the general principle listing education, training and experience, all issue relevant to productivity. There is no mention of any market justifications or sheer profit maximization arguments. Third, any defense would be scrutinized under the equivalent of the Title VII “business necessity” standard. One should note the business necessity standard is applicable only to productivity justifications – only to those factors that are listed as examples of the AFOTS, such as education, training and experience. This would bar all non-productivity factors, and subject productivity related factors to the additional scrutiny of the business necessity standard.134
Although the proposal incorporates Title VII “business necessity” language, it is not a revival of disparate impact theory within the EPA. The bill does not require the plaintiff to offer evidence that the scrutinized factor disparately impacts women, nor does it sanction its application to any factor. The adoption of the business necessity standard is of limited scope. Only justifications such as those enlisted as examples of legitimate factors are subject to business necessity scrutiny. All other explanations, including market based justifications are dismissed a-priori, without business necessity scrutiny. The structure of the amended AFOTS defense is a true manifestation of a partial causation model of discrimination. It takes pain in explaining what counts as a legitimate factor to make compensation decisions: a productivity related explanation that fulfills the business necessity requirement. The bill implicitly states that as a matter of law sex discrimination is established when gender pay disparities are the outcome of utilizing a criteria not authorized by the statute.
V. Conclusion
When discussing my ideas about pay equality with colleagues and friends I am usually confronted by one of three reactions. The skeptical want to know how is it possible that an employer can pay two equally productive workers different wages. They think that the disparate pay is the ultimate proof that these two workers are not equally productive. If indeed they are equally productive, a profit-maximizing employer should opt for hiring only employees willing to work for the lower wages, leading to a new equilibrium where again all workers with equal productivity are compensated at the same wage rate. The skeptical also make the argument that negotiation skills are relevant vocational abilities, which enhance performance of employees. The libertarians are worried about managerial discretion, and the ability under my thesis to actually implement deferential pay based on individual merit and productivity. They fear employers will react by instituting rigid pay schedules, similar to the ones in the unionized sector. These pay schemes will undermine productivity because they will curtail any individual incentive to excel and work hard. The enthusiasts want more, they inquire where else can the model of partial causation be applied. They support the idea of relevancy checklists to combat discrimination.
The response to the skeptical is three folded. The formal answer is that the partial causation model does not have any qualms with employers that argue that the plaintiff and the comparator are not equally productive. This is precisely what the model wants the employer to come forward and say. The model applies only if the employer insists on raising non-productivity claims, implicitly conceding that in terms of productivity the workers are equal. For example, an employer can justify pay disparity if he argues that negotiation skills are a good proxy for future performance on the job. This may be true in specific professions and positions, but not across the board. This transforms the market argument into an ability criterion which is legitimate if the employer successfully presents evidence of a productivity enhancing attribute. But it is not good enough for the employer to only justify the disparity by arguing he was not forced by market constraints to raise the wage of the female employee.
Why do employers keep hiring the higher paid individuals when they can hire equally productive employees for lower wages? In some industries and occupations this is exactly what is happening, resulting in a segregated labor market across gender lines. The partial causation model does not apply to comparable worth claims. In industries and occupations that the supply of individuals willing to work for lower wages does not meet the aggregate demand, if given the chance, the employer will engage in wage discrimination, paying individuals willing to work for lower wages their reservation wage and filling the remaining vacancies with individuals demanding higher pay.135 With the current economic meltdown there are reports that men are disproportionally the victims of layoffs, while female unemployment rate has been increasing at a slower rate.136 Layoff decisions are keyed to labor costs and individuals with higher pay productivity ratio, disproportionally men, are the ones targeted. This supports my argument that employers are in fact sustaining workforces with equally productive workers, performing the same work, for different pay.
The libertarians’ concerns are well grounded. If you care more about managerial autonomy than sex equality, you should not endorse partial causation. But libertarians should acknowledge that sticking with the causation model comes at a price. Many sex based compensation decision fly under the radar. Applying partial causation will curb managerial discretion, but it will preserve the most important aspect of managerial discretion - to design compensation schemes that promote productivity. It will force management and human resource professionals to sit down and engage in serious deliberation and data analysis to identify factors and pay incentive mechanisms that actually increase productivity. Advocating for partial causation is not equivalent to advocating for rank based compensation. To the contrary, it is about consciously tying individual pay to individual productivity.
To the enthusiasts I can only reply “I don’t know”. I have identified a special case, a specific area of discrimination law in which applying a relevancy test makes sense. An area where traditional legal tools are of limited service. Pay inequality is an issue too important to be left untreated. After all, the essence of the employment relationship is work preformed in consideration for pay. The overwhelmingly majority of individuals participating in the paid labor market do so to earn a living, to support themselves and their families. We have to make sure they are not being underpaid due to unfair and unlawful sex discrimination.

1* Professor of Law, Radzyner School of Law at the Interdisciplinary Center, Herzliya (Israel), and Global Visiting Professor of Law, New York University School of Law.

The reservation wage is the minimal wage for which a given employee is willing to perform a specific job.



2 In 2008, union members accounted for only 12.4 percent of employed wage and salary workers, only 13.7 percent were covered by a union or an employee association contract. In the private sector only 7.6 percent of workers were union members and 8.4 were covered by some collective bargaining agreement,. U.S. Dep’t of Labor, Bureau of Labor Statistics, USDL 09-0095, Union Members in 2008, table 1 and 3, (2009), available at http://www.bls.gov/news.release/pdf/union2.pdf. This data demonstrates that 9 out of 10 workers are not represented with relation to compensation decisions, and are either negotiating individually the terms and conditions of their employment, or are unilaterally offered employment contracts with no formal or informal bargaining taking place.

3 I reference briefly some of the literature and leading cases based on comparable worth claims only to better understand the treatment of the market defense in the context of equal pay for equal work, see infra notes 39-41 and accompanying text.

4 29 U.S.C. § 206(d) (2000).

5 I term this relevancy test as a “partial causation model” because the goal is to decrease the gender wage gap, not any unjustified pay inequality. To trigger review the model insists that you target pay disparity between two workers of opposite sex. The causation requirement is relaxed only regarding the motivation or statistical impact of the practice.

6 Jay Feinman, The Development of the Employment at Will Rule, 20 Amer. J. Legal Hist. 118 (1976).

7Thomas Miles ,Common Law Exceptions to Employment at Will and U.S Labor Markets, 16 JLEO 74 (2000).

8 Currently Montana is the only jurisdiction that opted to a mandatory just cause regime, Montana Wrongful Discharge From Employment Act, Mont. Code Ann. § § 39-2-901-914. But in the unionized sector most collective bargaining agreements incorporate job security protection clauses which limit employer’s prerogative to terminate employees to a restricted list of events.

9 I thank Cindy Estlund for pointing out the similarity between job security regimes and the two possibilities of conceptualizing discriminatory practice.

10 Francine Blau & Marianne Ferber, Discrimination: Empirical Evidences from the United States, 77 Amer. Econ. Rev. 316 (1987); Alan Manning & Joanna Swaffield, The Gender Gap in Early-Career Wage Growth, 118 Econ. J. 983 (2008).

11 Stephanie Boraas and William M. Rodgers III, How Does Gender Play a Role in the Earnings Gap? An Update, Monthly Labor Review, March 2003, at 9); Dan Black, Amelia Haviland, Seth Sanders & Lowell Taylor, Gender Wage Disparities among the Highly Educated, 43 J.Hum. Resources 630 (2008); Marianne Bertrand, Claudia Goldin & Lawrence Katz , Dynamics of the Gender Gap for Young Professionals in the Financial and Corporate Sectors, NBER Working Paper forthcoming (Jan. 2009), available at http://www.economics.harvard.edu/faculty/goldin/files/Dynamics.pdf .

12 Jane Waldfogel, Understanding the “Family Gap” in Pay for Women with Children, 12 J. Econ. Persp . 137 (1998); Daniel Fischel &Edward Lazear, Comparable Worth and Discrimination in Labor markets, 53 U. Chic. L. Rev. 891 (1986).

13 42 U.S.C. §§2000e-2000e-17 (2000). Title VII prohibits employment related discrimination on the basis of five group membership classifications: race, color, national origin, sex and religion.

14 See discussion in sections III A-B.

15 Paycheck Fairness Act, H.R. 12, 111th Cong. (2009), available at http://www.govtrack.us/congress/bill.xpd?bill=h111-12. The bill is pending in the Senate.

16 The Supreme Court has declined to settle this question in Randolph Central School District v. Aldrich, 506 U.S. 965 (1992).

17417 U.S. 188 (1974).

18 Id. at 205.

19 See, e.g., Horner v. Mary Inst., 613 F.2d 706 (8th Cir. 1980) (The plaintiff, a female physical education teacher accepted an initial job offer of $7,500. Subsequently a male teacher was hired, but did not accept the initial offer of $7,500, demanding $9,000. Special authorization by the school’s governing board was given to meet this compensation demand. The court accepts this as a legitimate reason for the pay disparity, a reason other than sex). See also Walter v. KFGO Radio, 518 F. Supp. 1309 (D.N.D. 1981) (Individual negotiations for initial pay that resulted in higher pay for a male employee performing the same job is not a violation of the EPA). Even the Equal Employment Opportunity Commission in its compliance manual for avoiding compensation discrimination instructs employers that as long as the employer treats women and men similarly when engaging in compensation negotiations any pay differentiation resulting from the negotiations is to be attributed to a factor other than sex: “CP, a certified public accountant (CPA), claims that R accounting firm violated the EPA by offering her a lower starting salary than it offered a male CPA. R proves that it offered a higher salary to the male because he had very favorable job references based on his productivity and successful track record in providing tax advice to clients; he received other job offers at the higher salary; and he relied on those job offers as a bargaining tool for negotiating the higher salary. R began salary discussions with CP with the same opening offer as given to the male, and indicated it was "willing to go higher if necessary." But CP did not bargain as assertively as the male CPA, and ended up with a lower starting salary. There is no evidence that R treated CP any differently than the male in salary negotiations. R has proved that the compensation disparity is based on a factor other than sex, and therefore no EPA violation is found.” Equal Employment Opportunity Commission, Compliance Manual, Section 10 Example 42 (2000), available at http://www.eeoc.gov/policy/docs/compensation.html.

20 See, e.g., Winkes v. Brown Univ., 747 F.2d 792 (1st Cir. 1984) (An associate professor alleged that the raise given to his female colleague was in violation of the EPA, after defendant matched the salary offered to a female associate professor by another institution in order to dissuade her from taking other employment. The court found that defendant sufficiently demonstrated that it had a customary de facto policy of responding to outside offers from other universities when it desired to keep a professor and his or her qualities merited such an action); Taylor v. White, 321 F.3d 710 (8th Cir. 2003) (The employer asserted a retention policy as a gender-neutral defense to the employee's unequal pay claim. The court rejected the employee's argument that a salary retention policy could not serve as a factor other than sex if it resulted in pay disparity between men and women).

21 Ciardella v. Carson City School Dist., 671 F. Supp. 699 (D. Nev. 1987) (Due to economic changes in the job market, the employer was required to extend an offer of compensation of approximately $10,000 more per year than the plaintiff was receiving while performing the same job).

22 Another commentator made a similar distinction dubbing the Corning Glass type of market defense as the market conditions defense and the newer version as a market value defense: “The market value defense differs from the market conditions defense in one important aspect. Under the market value defense, the defendant attempts to prove an actual difference in market demand for a particular employee. Under the market conditions defense, the defendant makes broad assumptions about an entire class of employees based on sex. The Court in Corning Glass clearly rejected a defense based on broad assumptions about market conditions. Because the market value defense more strongly reflects a defendant's prudent business judgment, however, the issue of whether courts should accept a market value defense is a closer question.” Thomas H. McCarthy, Jr., Note, "Market Value" as a Factor "Other Than Sex" in Sex-Based Wage Discrimination Claims, 1985 U. Ill. L. Rev. 1027, 1037 (1985).

23 See discussion of case law in section IV.C.

24 Linda Babcock & Sarah Laschever, Women Don't Ask: Negotiation and the Gender Divide (2002).

25 Id. at 1-2.

26 Id. at 62-84.

27 Uri Gneery, Muriel Niederle & Aldo Rustichini, Performance in Competitive Environments: Gender Differences, 118 Q. J. of Econ. 1049 (2003); Muriel Niederle & Lisa Vesterlund, Do Women Shy Away from Competition? Do Men Compete Too Much?, 122 Q. J. of Econ. 1067 (2007); Muriel Niederle & Lisa Vesterlund, Gender Differences in Competition, 24 Negotiation J. 447 (2008).

28 Niederle & Vesterlund, Gender Differences in Competition, supra, at 456-57.

29 Babcock & Laschever, supra note 24, at 130-42.

30 Hart Blanton et al., Contexts of System Justification and System Evaluation: Exploring the Social Comparison Strategies of the (Not Yet) Contented Female Worker, 4 Group Processes & Intergroup Rel. 126 (2001); Brett W. Pelham & John J. Hetts, Underworked and Overpaid: Elevated Entitlement in Men's Self-Pay, 37 J. Experimental Soc. Psychol. 93 (2001).

31 Charlene M. Callahan-Levy & Lawrence A. Messe, Sex Differences in the Allocation of Pay, 37 J. Personality & Soc. Psychol. 433 (1979). Two decades later, at Yale College, women students still paid themselves 18% less than men did, for work that was indistinguishable in quality or content. John T. Jost, An Experimental Replication of the Depressed Entitlement Effect Among Women, 21 Psych. Women Q. 387 (1997). In another experiment participants were instructed to perform a task until they thought they earned four dollars. Women worked on average 22% longer than men and were 32% more productive than men. Brenda Major et al., Overworked and Underpaid: On the Nature of Gender Differences in Personal Entitlement, 47 J. Personality & Soc. Psychol. 1399 (1984).

32 Brenda Major, supra note 31.

33 Ledbetter v. Goodyear Tire & Rubber, 550 U.S. 618, 650 (2007) (Ginsburg, J., dissenting). Justice Ginsburg references the importance of women accessing reliable information pertaining to compensation in combating compensation discrimination in the workplace. The Paycheck Fairness Act also addresses the issue of lack of vital information about wages. The bill institutes a retaliation cause of action against employers that retaliates against employees who engage in information sharing and inquiries about wages. It also requires the EEOC to survey pay data and obligates employers to submit any needed pay data identified by the race, sex and national origin of employees, see Paycheck Fairness Act §§ 3, 8, supra note 15.

34 Heather Anteeol & Peter Kahm, Gender as an Impediment to Labor Market Success: Why Do Young Women Report Greater Harm? 18 J. Lab. Econ. 702 (2000).

35Audra Bowlus, A search Interpretation of Male Female Wage Differentials, 15 J. Lab. Econ. 625 (1997) (differences in anticipated labor force attachment led to lower reservation wages for women).

36Peter Orazem, James Werbel & James McElroy, Market Expectations, Job Search, and gender differences in Starting Pay, 24 J. Lab. Research 307 (2003) (Women had lower starting salary expectations, even with the same major, labor market information and job search strategies. Lower pay expectations led to lower pay outcome for women.).

37 I structured the dollar amounts in the example to mirror the findings that women on average estimate their productivity lower than men and also have a lower reservation wage. It is also a plausible assumption that when you estimate your productivity at a lower rate there is a depressing effect on your reservation wage.

38 An exception to the underlying assumption that employers should not be held liable for following the market wage rate are cases in which the employer intentionally classifies employees by sex to take advantage of women’s lower reservation, as was the situation in the Corning Glass plant, Corning Glass Works v. Brennan, 417 U.S. 188, 215 (1974).

39 For an excellent review of the debate on comparable worth see Paul Weiler, The Wages of Sex: The Uses and Limits of Comparable Worth, 99 Harv. L. Rev. 1728 (1986)

40 The final blow to the endeavor to incorporate comparable worth into Title VII was in American Nurses' Ass'n v. Illinois, 783 F.2d 716, 722 (7th Cir. 1986) .

41 AFSCME v. State of Washington, 770 F.2d 1401, 1408 (1985) (“The State of Washington's initial reliance on a free market system in which employees in male-dominated jobs are compensated at a higher rate than employees in dissimilar female-dominated jobs is not in and of itself a violation of Title VII, notwithstanding that the Willis study deemed the positions of comparable worth. Absent a showing of discriminatory motive, which has not been made here, the law does not permit the federal courts to interfere in the market-based system for the compensation of Washington's employees.”); Briggs v. Madison, 536 F. Supp. 435 (1982) (dismissal of a sex discrimination claim where the defendant argued that higher market wages for sanitarians than for nurses were responsible for pay disparities between female and male employees).

42 Usually pay does not fall under the prevailing market rate.

43 Robert L. Nelson & William P. Bridges, Legalizing Gender Inequality: Courts, Markets, and Unequal Pay for Women in America (1999).

44 Id. at 101-05.

45 563 F2d 353 (8th Cir. 1977).

46 Nelson & Bridges, supra note 43, at 156-58

47 Nelson & Bridges, supra note 43, at 150-66.

48 Id. at 162.

49 Id. at 166.

50 Id. at 166.

51 See Robert L. Nelson, Ellen C. Berrey & Laura Beth Nielsen1, Divergent Paths: Conflicting Conceptions of Employment Discrimination in Law and the Social Sciences, 4 Annu. Rev. Law Soc. Sci. 103 (2008) (surveying social scientific research which documents the pervasiveness of unintentional bias and the persistence of organizational processes that generate workplace discrimination).

52 This is the rationale of Corning Glass Works v. Brennan, 417 U.S. 188, 215 (1974).

53 Id.

54 563 F2d 353 (8th Cir. 1977).

55 Other cases clarifying this point are Brennan v. City Stores, Inc., 479 F.2d 235, 241 n.12 (5th Cir. 1973) (“Loveman's contends that the tighter market for salesmen and male tailors justifies its hiring of men with such skills at a rate higher than that paid to obtain women of similar skills. While factors other than sex (customer embarrassment primarily) justify the employer in seeking male personnel to work in conjunction with selling and fitting male clothing, this is no excuse for hiring saleswomen and seamstresses at lesser rates simply because the market will bear it. Just such disparities were what Congress intended to correct by this legislation.”); Hodgson v. Brookhaven General Hosp., 436 F.2d 719, 726 (5th Cir. 1970) ("Clearly the fact that the employer's bargaining power is greater with respect to women than with respect to men is not the kind of factor [other than sex] Congress had in mind. Thus it will not do for the hospital to press the point that it paid orderlies more because it could not get them for less.”).

56 See supra notes 19-21 and infra notes 110-114 and accompanying text.

57 McCarthy, supra note 22 , at 1042 (“If the defendant must pay certain employees more either to attract or to keep those employees, then prudent business judgment would require that the defendant pay those employees more. The defendant’s business judgment is facially nondiscriminatory.”).

58 Mark Kelman, Discrimination and Groups, 53 Stan. L. Rev. 834, 859-867 (2000) (surveying the justifications for group-based theory of discrimination).

59 Reeves v. Sanderson Plumbing Products, Inc., 530 U.S. 133 (2000); St. Mary’s Honor Center v. Hicks, 509 U.S. 502, 519 (1993).

60 Texas Dept. of Community Affairs v. Burdine, 450 U.S. 248 (1981); Swierkiewicz v. Sorema, 534 U.S. 506 (2002).

61 Initial articulation in Griggs v. Duke Power, 401 U.S. 424 (1971). The disparate impact framework was later codified in Title VII42 U.S.C. §2000e-2(k).

62 42 U.S.C. §2000e-2(k)(1)(B)(ii) (“If the respondent demonstrates that a specific employment practice does not cause disparate impact, the respondent shall not be required to demonstrate such practice is required by business necessity.”).

63 Wernsing v. Dep’t of Human Services, 427 F.3d 466, 470 (7th Cir. 2005) (“Wage patterns in some lines of work could be discriminatory, but this is something to be proved rather than assumed. Wernsing has not offered expert evidence (or even a citation to the literature of labor economics) to support a contention that the establishments from which the Department recruits its employees use wage scales that violate the Equal Pay Act and thus discriminate against women. If sex discrimination led to lower wages in the "feeder" jobs, then using those wages as the base for pay at the Department would indeed perpetuate discrimination and violate the Equal Pay Act”.); Kouba v. Allstate Insurance Co., 692 F2d 873, 876 (9th Cir. 1982) (same).

64 The use of social framework evidence in employment discrimination litigation has recently come under attack from the same scholars who introduced the term. See John Monahan, Laurens Walker & Gregory Mitchell, Contextual Evidence of Gender Discrimination: The Ascendance of “Social Frameworks,” 94 VA. L. REV. 1715 (2008), but see Melissa Hart and Paul Secunda, A Matter of Context: Social Framework Evidence in Employment Discrimination Class Actions, Fordham L. Rev. 2009 (forthcoming) (a warm endorsement of the practice).

65 490 U.S. 228 (1989).

66 222 F.R.D. 137 (N.D. Cal. 2004), aff’d 509 F. 3d 1168 (9th Cir. 2007), review en banc granted, 2009 WL 365818 (9th Cir. Feb. 13, 2009).

67Laurens Walker & John Monahan, Social Frameworks: A New Use of Social Science in Law, 73 Va. L. Rev. 559, 559 (1987).

68 Susan T. Fiske & Eugene Borgida, Providing Expert Knowledge in an Adversarial Context: Social Cognitive Science in Employment Discrimination Cases, 4 Ann. Rev. L. & Soc. Sci.. 123, 128 (2008).

69 This was the crux of the expert testimony in the Price Waterhouse litigation. Susan Fiske, a renowned social psychologist, testified about how the plaintiff, Ann Hopkins, was denied partnership at an accounting firm due to gender stereotyping and the discomfort of her colleagues caused by her seemingly masculine behavior. The court dismissed the employer objection to relying on testimony which applies general psychological research to the facts of the case: “Indeed, we are tempted to say that Dr. Fiske's expert testimony was merely icing on Hopkins' cake. It takes no special training to discern sex stereotyping in a description of an aggressive female employee as requiring ‘a course at charm school.’ Nor, turning to Thomas Beyer's memorable advice to Hopkins, does it require expertise in psychology to know that, if an employee's flawed ‘interpersonal skills’ can be corrected by a soft-hued suit or a new shade of lipstick, perhaps it is the employee's sex and not her interpersonal skills that has drawn the criticism.” Price Waterhouse v. Hopkins, 490 U.S. 228, 256 (1989).

70 There is no exclusion of sociologists giving expert testimony, although the common practice is to hire cognitive and social psychologists, Matthew Wise, From Price Waterhouse to Dukes and Beyond: Bridging the Gap Between Law and Social Science By Improving the Admissibility Standard for Expert

Testimony, 26 Berk.. J. Emp.. & Lab. L 545, 561 (2005).

71 563 F2d 353 (8th Cir. 1977).

72 Nelson and Bridges are aware of the caveat: “if the trial court had come to the same interpretation of the events as we offer, it does not necessarily follow that the plaintiffs would have prevailed. The option of the court of appeals contains language that might treat the political effectiveness of various groups of workers as a valid basis for paying them different wages.” Nelson & Bridges, supra note 43 at 167.

73 Texas Dept. of Community Affairs v. Burdine, 450 U.S. 248 (1981).

74 St. Mary’s Honor Center v. Hicks, 509 U.S. 502 (1993).

75 Id.

76 Andrew Spiropoulos, Defining the Business Necessity Defense to the Disparate Impact Cause of Action: Finding the Golden Mean, 74 N.C. L. Rev. 1479 (1996).

77 42 U.S.C. § 2000e-2(h) (2000).

78 Weiler, supra note 28, at 1734-1735.

79 452 U.S. 161 (1981).

80 Id. at 170-171.

81 The court addressed this issue in Gunther only to explain why a narrow reading of the Bennett Amendment will not necessarily render it superfluous. Id. at 171 (“Although we do not decide in this case how sex-based wage discrimination litigation under Title VII should be structured to accommodate the fourth affirmative defense of the Equal Pay Act . . . we consider it clear that the Bennett Amendment, under this interpretation, is not rendered superfluous.”).

82 See for example cases discussed in infra notes 110-114 and accompanying text.

83 See e.g., EEOC v. J.C. Penney Co., Inc., 843 F.2d 249, 253 (6th Cir. 1988) (“In our circuit, however, the Bennett Amendment cannot constitute a blanket bar to all claims of wage discrimination  based on disparate impact because the "factor other than sex" defense does not include literally any other factor, but a factor that, at a minimum, was adopted for a legitimate business reason.”) For a full discussion of the split among this circuits pertaining to the interpretation of the AFOTS defense see Ruben Bolivar Pagan, Defending the "Acceptable Business Reason" Requirement of the Equal Pay Act: A Response to the Challenges of Wernsing v. Department of Human Services, 33 Iowa J. Corp. L. 1007 (2008).

84 544 U.S. 228 (2005).

85 29 U.S.C. § §621-633a (2000).

86 Id. at 239 n.11.

87 The suggestion in Gunther that disparate impact is not available under Title VII is misguided. This would lead to a situation that two similar claims of Title VII compensation discrimination, one claiming race or national origin base discrimination and the other claiming sex based discrimination would not be offered the same scope of protection. The sex based claim would be restricted to disparate treatment, while the race claim could resort to the disparate impact model as an alternative.

88 New York City Transit Auth. v. Beazer, 440 U.S. 568 (1979) (general population comparisons discounted by the Court). But see Dothard v. Rawlinson 433 U.S. 321 (1977) (disparate impact proven by using general population data on how height and wage requirements disparately impact women in comparison to men). The argument that negotiation practices adversely impact women resembles more the Beazer decision, dealing with the adverse impact on racial minorities of denying employment to individuals who participated in methadone maintenance program. In both cases there could be variance between the impact of the practice on the defendant’s work force and the impact on the general population. When dealing with height and weight requirements using general population data may be appropriate since there is no reason to suspect that a specific workplace will display different patterns from the general population. Dealing with compensation determination, many nuanced considerations are usually present, and the employer can rightly demand that the statistical regression analysis will be conducted on his actual workforce.

89 The Civil Rights Act of 1991, which codified disparate impact law relieves the plaintiff of the requirement to isolate specific employment practices for the statistical analysis in cases where “the complaining party can demonstrate to the court that the elements of a respondent’s decision making process are not capable of separation for analysis” in which case “the decision making process may be analyzed as one employment practice.” 42 U.S.C. § 2000e-2(k)(1)(A)(i) (2000). But the exemption is usually irrelevant to the situation discussed in this Article where the plaintiff targets a specific employment practice, such as reliance on prior salaries, matching counter offers, or individual negotiations, which can be separated form the bottom-line compensation decision.

90 42 U.S.C. § 2000e-2(k)(1)(A)(i)(2000).

91 For an empirical study on disparate impact case law see Michael Selmi, Was the Disparate Impact Theory a Mistake?, 53 UCLA L. Rev. 701, 705-706 (2006) (concluding that “while it is true that the disparate impact theory allows proof of discrimination without the need to prove intent, employers are allowed to justify their practices under a business necessity test. Because that test allows for normative judgments regarding what practices are properly defined as discriminatory, courts readily accept most proffered justifications.”); Spiropoulos supra note 76 (The Supreme Court has implemented two standards of review for the business necessity defense. When skill and jobs can be measured by scientific validation techniques the court is more willing to scrutinize the business justification of the employer. But for jobs requiring special skills and other qualities that cannot be measures empirically the courts give more latitude to the employer’s discretion.).

92 Los Angeles Dep't of Water and Power v. Manhart, 435 U.S. 702, 717 (1978). For a similar rejection of a profit argument under the Bona Fide Occupational Qualification (BFOQ) defense in a disparate treatment case see Wilson v. Southwest Airlines Co, 517 F. Supp. 292 (N.D. Tex. 1981).

93 Mark S. Brodin, Costs, Profits, And Equal Opportunity, 62 Notre Dame L. Rev. 318 (1987).

After the employer establishes a business necessity defense, the plaintiff can still resort to offering an alternative employment practice which achieves the same goal as the disparately impacting practice, 42 U.S.C. § 2000e-2(k)(1)(A)(ii)(2000). Yet plaintiffs will find it hard to come up with alternative practices which are as cost effective.

94 See, e.g., EEOC v. J.C. Penney Co., Inc., 843 F.2d 249 (6th Cir. 1988) (An employer “head of household” benefit scheme was challenged under disparate impact law. The employer covered only spouses of employees that earned more than half of the couple’s total income. This program disparately impacted the coverage of women as compared to men. Business necessity was established since the objective was to cover the neediest employees, at the lowest cost. Taking cost into account was not governed by the Manhart decision since it did not intend to discriminate between the sexes); Wambheim v. J.C. Penny Co. 705 F.2d 1492 (9th Cir. 1983) (same); Christensen v. Iowa, 563 F2d 353,356 (8th Cir. 1977) (willing to accept, under Title VII jurisprudence, an employer’s adherence to market pressure in setting wages: “We find nothing in the text and history of Title VII suggesting that Congress intended to abrogate the laws of supply and demand or other economic principles that determine wage rates for various kinds of work. We do not interpret Title VII as requiring an employer to ignore the market in setting wage rates for genuinely different work classifications.”).

95 With relation to an age discrimination disparate impact claim the Supreme Court stated that an employer’s decision to grant a larger raise to lower echelon employees for the purpose of bringing salaries in line with that of surrounding police forces was a decision based on a "reasonable factor other than age", Smith v. City of Jackson, 544 U.S. 228, 242 (2005). Although Smith is an age discrimination disparate impact case, relating to the disparate impact of a raise policy on younger verses older employees, the rationale of granting deference to the employer’s business judgment about salary setting maybe applicable to Title VII disparate impact wage discrimination jurisprudence.

96 Ian Ayres, Market Power and Inequality: A Competitive Conduct Standard for Assessing When Disparate Impacts Are Unjustified, 95 Cal. L. Rev. 669 (2007)

97 Id. at 669.

98 Id. at 672.

99 Id. at 672-673.

100 Kelman supra note 58.

101 This proposal stems from a similar understanding of the complexity of workplace decision-making that is driving a growing number of scholars to recommend that employers adopt structured processes and protocols to self regulate their compliance with Title VII, see for example, Susan Sturm, Second Generation Employment Discrimination: A Structural Approach, 101 Colum. L. Rev. 458 (2001); Tristin Green, Discrimination in Workplace Dynamics: Toward a Structural Account of Disparate Treatment Theory, 38 Harv. C.R.-C.L. L. Rev. 91 (2003); Cynthia Estlund, Rebuilding the Law of the Workplace in an Era of Self-Regulation, 105 Colum. L. Rev. 319, 366-372 (2005). The structural approach is an attempt to improve compliance with anti-discrimination mandates in situations we fear that the employer is perhaps engaging in unconscious bias and discrimination. Instituting self evaluation and prophylactic measures is presumed to decrease the risk of the employer unconsciously and unintentionally reaching unlawful discriminatory decisions. The difference between my proposal and the structural approach is that the latter builds on establishing process and procedures to de-bias the institution from its unconscious discriminatory practices. Yet the structural approach is still focused on causation. Process is established to make sure, as a prophylactic measure, that prohibited considerations are not part of the decision-making process.

102 In disparate treatment law the landmark decision of McDonnell Douglas v. Green, 411 U.S. 792 (1973) established the four prong prima facie case (PFC) for an individual disparate treatment case and articulated the burden of production the employer carries to answer the PFC. In disparate impact the Civil Rights Act of 1991 codified the various stages and burden of persuasion shifting, 42 U.S.C. §2000e-2(k) (2000).

103 One such false positive case is when the disparity in compensation is due to changes over time in the demand or supply of employees in an industry, profession or geographical area as was the case in Ciardella v. Carson City School District, 671 F. Supp. 699 (D. Nev. 1987) (Due to economic changes in the job market, the employer was required to extend an offer of compensation of approximately $10,000 more per year than the plaintiff was receiving while performing the same job). In these situations there is no underlying, unidentified statistical correlation between the temporal market conditions and the sex of the workers hired at the different points in time. But since market conditions are not listed on the affirmative list, an employer maybe found liable. In these situations the positive definitions of discrimination entails costs.

104 In the first quarter of 2009, women who worked full time had median earnings of $649 per week, or 78.9 percent of the $823 median for men. U.S. Dep’t of Labor, Bureau of Labor Statistics, USDL 09-0390, Usual Weekly Earnings of Wage and Salary Workers: First Quarter 2009 (2009), available at http://www.bls.gov/news.release/pdf/wkyeng.pdf.

105 In 1998, women earned about 76 percent as much as men. The median weekly earnings of female fulltime wage and salary workers were $456 compared to $598 for men. U.S. Dep’t of Labor, Bureau of Labor Statistics, Report 928, Highlights of Women’s Earnings in 1998 (1999), available at http://www.bls.gov/cps/cpswom98.pdf.

106 Guaranteeing reduction in false positive rates requires restrictive definitions of what qualifies as equal work and what qualifies as equal productivity.

107 Corning Glass Works v. Brennan, 417 U.S. 188, 196 (1974) (“while the Act is silent on this question, its structure and history also suggest that once the Secretary has carried his burden of showing that the employer pays workers of one sex more than workers of the opposite sex for equal work, the burden shifts to the employer to show that the differential is justified under one of the Act's four exceptions. All of the many lower courts that have considered this question have so held, and this view is consistent with the general rule that the application of an exemption under the Fair Labor Standards Act is a matter of affirmative defense on which the employer has the burden of proof.”).

108 Randolph Central School District v. Aldrich, 506 U.S. 965 (1992).

109 640 F.2d 96 (8th Cir. 1980).

110 Another 8th Circuit decision affirming the Strecker’s standard .is Taylor v. White, 321 F.3d 710, 719 (8th Cir. 2003) (“we do not sit as a super-personnel department that re-examines an entity's business decisions . . . As such we are reluctant to establish a per se rule that might chill the legitimate use of gender-neutral policies and practices.” ).

111 427 F.3d 466 (7th Cir. 2005).

112 Id. at 468.

113 Id, at 469 (“An analogy to disparate-impact litigation under Title VII does not justify a "business reason" requirement under the Equal Pay Act, however, because the Equal Pay Act deals exclusively with disparate treatment. It does not have a disparate-impact component.”).

114 692 F2d 873 (9th Cir. 1982).

Id, at 876.

115 Id.

116 Id. The court declined to articulate what falls within the standard of “acceptable business reason” leaving the compiling of a list of unacceptable reasons or a more concise formulation of the standard to “another day”. Id., at fn 6

117 843 F.2d 249,253 (6th Cir. 1992).

118 Id.

119 841 F.2d 1567 (11th Cir. 1988).

120 Id. at 1571.

121 963 F.2d 520 (2d Cir. 1992).

122 Id., at 523.

123 Id., at 526.

124 This is also how the Wernsing court characterizes the Kouba standard (“Kouba, which originated the "acceptable business reason" requirement, did not explain its genesis; it was advanced as ukase. The ninth circuit proceeded as if the Equal Pay Act worked like the disparate-impact theory under Title VII: if the plaintiff shows that an employment practice adversely affects protected workers as a group, then the employer must provide a strong reason ("business necessity") for the practice.” Wernsing v. Dep’t of Human Services 427 F.3d 466, 468 (7th Cir. 2005).

125 The courts acknowledge that there are variations between the two statutes in the prima facie case and the scope of the employer’s defense, but they do not consider these differences to be foundational.



126 Ian Ayers, Market Power and Inequality, supra note 97.

127 29 U.S.C. § §201-219 (2006).

128 Paycheck Fairness Act, H.R. 12, 111th Cong. (2009), available at http://www.govtrack.us/congress/bill.xpd?bill=h111-12

129 § 3(B).

130 § 3(C).

131 § 4.

132 §§ 5, 6 and 9.

133 The bona fide requirement was implicitly incorporated in the existing interpretation of the AFOTS. None of the Circuits interpreting the AFOTS defense alluded to a possibility that they will not review a claim that the defense served as a subterfuge for intentional discrimination.

Using almost identical language to the definition of “business necessity” defense of Title VII, 42 U.S.C. § 2000e-2(k) (2000).

134 Section 3(B) of the bill states that “the bona fide factor defense described in subparagraph A (iv) [the AFOTS] shall apply only if the employer demonstrates” business necessity. I read this to mean that the employer has to meet two accumulative conditions. First he has to identify the bona fide factor other than sex, which is limited only to productivity issues such as education, training, and experience. In addition he has to demonstrate that these factors meet the business necessity standard of Title VII. This is a very strict standard.

The fact that some women are effective as men when negotiating on behalf of third parties should be taken into account when an employer raises the argument that promotion of self-interest in pay bargaining is a relevant trait to the job at question .

135 David Card & Alan Krueger, Myth and Measurement: The New Economics of Minimum Wage (1995) (Questioning the assumption that competition drives employers to pay all employees within one industry or regional area a “market rate”. Some employers are able to attract employees at below market rates, but supply of these below market wage employees does not meet demand. Arguing that a small increase in the minimum wage will not necessarily result in higher unemployment rates, since mandating employers to pay higher wages through minimum wage regulation will enable them to fill vacancies that existed when the employer paid below market rates that were above the minimum wage.)

136 See Barbara Haugenbaough, Men Losing Jobs at Higher Rate Than Women in Recession, USA Today, January 12, 2009 at http://www.usatoday.com/money/economy/2009-01-11-unemployment-rate-sexes_N.htm (“In the year since the recession began in December 2007, the jobless rate for men rose from 4.4% to 7.2%. At the same time, the jobless rate for women rose from 4.3% to 5.9%.”). Some attribute the differences in the rising unemployment rates as caused by the segregated labor market; the fact that female occupations such as in the health and education industries were more insulated to layoffs than male occupations in the construction and manufacturing. Id.



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