On December 6, 2019, a three-judge panel of the U.S. Court of Appeals for the Second Circuit (which hears appeals from federal district courts located in Connecticut, New York, and Vermont) unanimously held that employees can allege gender-based pay discrimination under Title VII of the Civil Rights Act even if they cannot show that a member of the opposite sex is paid more for equal work. This ruling will make it easier for employees in the Second Circuit to bring claims alleging discriminatory compensation practices.
Danielle Markou, a former Systemax Vice President of Risk Management, sued her former employer, as well as the company’s CEO and CFO in their personal capacities, alleging violations of various laws, including the Equal Pay Act of 1963 (“EPA”), Title VII of the Civil Rights Act of 1964, the Pregnancy Discrimination Act of 1978, the whistleblower protections of the Consumer Product Safety Improvement Act of 2008, and related provisions of New York state statutes. Specifically, Markou alleged that the defendants paid her less than they would have if she were a man, retaliated against her when she raised concerns about disparate pay and possible Consumer Product Safety Act violations, and fired her because she was pregnant. Markou was able to show that Systemax paid her at a rate that was below market for her position, while at the same time paying nearly all of Markou’s male executive peers above market rate for their respective positions.
The district court held that Markou failed to carry her in initial burden of proof on any of her claims, including unequal pay under Title VII, because she did not identify men whom Systemax paid more for the same work. However, the Second Circuit disagreed, holding that in order to establish a prima facie pay discrimination claim under Title VII, a plaintiff need not first establish an EPA violation—in other words, that she performed equal work but received unequal pay. Rather, Title VII only requires that a plaintiff prove that her employer “discriminated against [her] with respect to [her] compensation . . . because of [her] sex.” In so holding, the court reasoned that applying the EPA’s equal-work standard to Title VII cases would erroneously mean “that a woman who is discriminatorily underpaid could obtain no relief—no matter how egregious the discrimination might be—unless her employer also employed a man in an equal job in the same establishment, at a higher rate of pay.”
The court acknowledged it has previously stated that unequal pay claims under Title VII and New York’s state anti-discrimination law are “generally analyzed under the same standards used in an EPA claim.” However, it explained that although under both the EPA and Title VII “plaintiffs generally must demonstrate their membership in a protected class that receives unequal pay for substantially the same work,” the two laws have different burdens and neither should be interpreted in a manner that would undermine the other. Therefore, the Second Circuit concluded that a Title VII plaintiff alleging a discriminatory compensation practice need not establish that she performed equal work for unequal pay, just that her lower compensation was because of her sex. Ultimately, the court held that Markou made a sufficient showing of discriminatory intent because she was able to show that she was paid below the market rate for her position while similarly situated men were paid above the market rate for their respective positions, and because the Company’s CFO consistently made disparaging remarks about women. Thus, it determined that Markou made a prima facie case for pay discrimination and retaliation under Title VII, and remanded the case for further proceedings.
This Second Circuit decision clarifies the jurisdiction’s standard for sex-based pay discrimination claims under Title VII and may make it easier for plaintiffs to bring such claims. Employers should review their compensation practices to ensure that they are consistent across all positions and are not discriminatory against employees based on sex.