Alabama’s New Pay Equity Law

By Morgan Pike Epperson and T. Scott Kelly

Alabama became the 49th state to adopt equal pay legislation when Governor Kay Ivey signed the Clark Figures Equal Pay Act (CFEPA) on June 11, 2019. The CFEPA, effective September 1, 2019, prohibits an employer from paying an employee less than another employee of a different race or sex for equal work.

How does the CFEPA Compare with Existing Federal Law?

The CFEPA tracks existing federal laws such as the federal Equal Pay Act (EPA) and Title VII of the Civil Rights Act, with a few key changes.

Prohibition of Discrimination: The EPA prohibits an employer from paying an employee a lower wage rate than an employee of another sex for equal work in the same establishment, where job performance requires “equal skill, effort, and responsibility” and occurs “under similar working conditions.” The CFEPA adopts almost identical language, but adds “education” and “experience” to the list of job performance requirements.

Race: The EPA prohibits sex-based wage discrimination, while the CFEPA prohibits both race and sex-based wage discrimination. However, the CFEPA does not provide greater protection than federal law because Title VII prohibits discrimination based on an employee’s race, color, religion, sex, or national origin.

Exceptions: Both the CFEPA and the EPA identically provide that there is not violation where the employer bases the wage differential on a seniority system, a merit system, a system that measures earnings by quantity or quality of production, or any factor other than sex or race.

Wage History: The CFEPA goes further than the EPA by prohibiting an employer from refusing to “interview, hire, promote, or employ,” or retaliating against an applicant, because the applicant fails to provide wage history. Other states have completely banned wage history requests, but, federal law presently does not. The CFEPA may provide a new path to court for employees claiming discrimination for not providing wage history, and it raises the stakes for pay-history inquiries during the selection process.

Pleading Standard: The CFEPA contains a heightened pleading standard for employees. Rather than merely stating a “plausible” claim, as with the EPA, employees must “plead with particularity” that (1) the employer violated the act, and (2) that the alleged wage differential is not due to one of the four permissible exceptions listed above. Alabama courts might interpret this standard to require employees to identify a comparator of a different race or gender in the complaint. Ultimately, the pleading standard’s impact will develop as litigation progresses through Alabama courts. 

Penalties: The CFEPA penalties are not as severe as EPA penalties, which impose criminal fines for willful violations. In contrast, an employer violating the CFEPA may be liable to the employee only for the impermissible wage difference, with interest. Notably, while Title VII has damage caps, and the EPA limits the types of damages recoverable, the CFEPA contains no damage caps.

No Double Recovery: Under the CFEPA, if an employee files claims under both the EPA and the CFEPA, and recovers damages under both, then the employee must return to the employer the lesser amount recovered under either law.

Recordkeeping Requirements: The CFEPA adopts federal recordkeeping requirements already established by the U.S. Department of Labor for the Fair Labor Standards Act (FLSA). Interestingly, the CFEPA does not define “employer,” but a conservative approach would be to presume coverage for all Alabama employers.  The FLSA requires employers to keep certain records regarding employee pay for three years, as opposed to one year under Title VII.

Statute of Limitations: Like the EPA, the CFEPA has a two-year statute of limitations, but the CFEPA does not have the EPA three-year limit for willful violations. As for Title VII compensation discrimination claims, an employee must file with the EEOC within 180 days. Before the Lily Ledbetter Fair Pay Act of 2009, the last day to file a pay claim was either two years or 180 days after the alleged discrimination for EPA and Title VII claims respectively. The Lily Ledbetter Act significantly expanded the limitations period by counting each paycheck containing discriminatory compensation as a separate violation, regardless of when the discrimination began. The CFEPA is silent on how it relates to the Lily Ledbetter Act, so it is unclear how Alabama courts will interpret the limitations period. Optimistically, Alabama courts may embrace a more conservative approach and find that the limitations period begins when the employee obtains notice of the discrimination.

State Court vs Federal Court: The enactment of the CFEPA begs the question: will Alabama state court employment claims increase? A similar question arose upon adoption of the Alabama Age Discrimination in Employment Act, but an uptick in state claims never followed, presumably because of the statute’s ambiguous language. Many attorneys may not want to be the first to test an uncharted statute when the federal path is already paved. Time will tell as the CFEPA goes into effect.

Bypassing Federal Agencies: Federal law currently provides a path straight to court for compensation discrimination claims. EPA claimants can head to court without filing an EEOC charge. Moreover, while Title VII race-based claims require an initial EEOC charge, an employee can bypass the agency by filing a claim under 42 U.S.C. § 1981. Although rare, Section 1981 claims afford employees a route to federal court for race claims where the employee misses the 180-day deadline for filing an EEOC charge. Now, the CFEPA may provide a path straight to state court for race-based pay claims that would be untimely under existing federal law.

How Should Alabama Employers Prepare to Comply with the CFEPA?

• Consider avoiding wage history requests. Given that many states are banning the wage history question, and the CFEPA creates liability for wage-history discrimination, the best practice may be to avoid asking altogether, absent a compelling reason.

• Establish clear and defensible compensation policies and pay practices.  It is prudent periodically to review compensation policies and practices – at least annually – to ensure they are useful and that minimal deviation occurs.    

• Clearly document compensation policies and decision-making in evaluating pay equity. Compensation decisions are challenging to defend without accurate records documenting the reasons behind compensation decisions. Consider documenting each element used to establish compensation for a given employee, to the extent possible. Common examples of data points that are useful in explaining compensation include time in position, education level, years of relevant experience, certifications, knowledge and/or skills, and applicant salary requirements/negotiations (when the applicant offers the information).

• Maintain written, specific, and current information on job content, skill levels, essential functions, performance requirements, reporting structure, etc. Although not required, job descriptions outlining the position’s required or preferred knowledge, skills, and abilities are useful in establishing and justifying the salary of new and current employees.

• Consider conducting a proactive, privileged and voluntary analysis of compensation as a first step to limit legal risk. But do so with the assistance of an attorney, and an appropriate subject matter expert, such as a labor economist.