37,000 female managers of Family Dollar Stores, Inc, sued the company in a class action (a lawsuit with multiple plaintiffs, each of whom suffered an injury or financial loss from the same cause) claiming gender discrimination in pay. The company has settled the case for $45 million.
The lawsuit alleged that female managers were paid less than their male counterparts for doing the same job. The suit covers the time period from July, 2002 to November, 2017. The plaintiffs referenced the Civil Rights Act of 1964 and the Equal Pay Act of 1963, federal laws that require employers to pay men and women equally for equal work, subject to differentials based on education, experience and performance.
An additional component of the settlement is Family Dollar’s agreement to perform a “systematic review” of its process for setting starting salaries for store managers. The company also agreed to consult with experts in the fields of labor economics and industrial/organization psychology to make salary adjustments to the pay of female store managers “as deemed necessary and appropriate.”
The settlement notwithstanding, the company denied any wrongdoing, claiming it “has treated all employees fairly with regard to salaries and other compensation at all times, regardless of sex.” Dollar Tree, which purchased Family Dollar in 2015, has not commented on the settlement.
When a class action is settled, the judge must be involved. The judge is required to schedule a hearing to determine if the proposed settlement is fair, reasonable and adequate for class members. The judge in the Family Dollar case, US District Judge Max Cogburn in Ashville, North Carolina, has approved the settlement finding the amount reasonable, and also helpful in avoiding further litigation.
Family Dollar is a chain of discounted variety stores. It has 8,000 stores throughout the country and is headquartered in Mathews, North Carolina.
Cases like this one alleging unequal pay based on gender prompted many businesses to undertake pay audits and ban salary history questions in an effort to avoid gender bias because basing an employee’s salary on prior earnings perpetuates unfair pay practices including the gender pay gap. Massachusetts, California and New York City adopted laws that prevent managers from asking about an applicant’s prior salary.
Bans on inquiries about salary history received a major boost this week with a decision from the U.S. Court of Appeals for the Ninth Circuit (Alaska, Arizona, Californian, Idaho, Montana, Nevada, Oregon and Washington) in a case involving a school math consultant. She discovered she was making $10,000 less than her male colleagues who had less experience and were doing the same work. She sued claiming a violation of the Equal Pay Act. The Fresno County California Office of Education defended the case on the ground that her salary was based on her previous wages and had nothing to do with her gender. The court rejected this arguement , noting that the Equal Pay Act was enacted to address pay inequity based on sex. The court held, “Employers cannot justify paying a woman less than a man doing similar work because of her salary history.”
For more information, see Rizo v. Fresno County Office of Education, Ninth Circuit, No. 16-15372 (April 9, 2018)..
How does banning salary history questions from interviews with job applicants help eliminate unequal pay?
Rizo v. Fresno County Office of Education