Alabama’s New Equal Pay Law — A Compliance Resource

Brooke Nixon, of Constangy, Brooks, Smith & Prophete, LLP

Alabama has now joined a growing number of states that have recently enacted pay equity laws. In all, 49 states have an equal pay law of some kind, with Mississippi being the only state without one. Gov. Kay Ivey signed the Clarke-Figures Equal Pay Act (CFEPA) on June 11, 2019. The CFEPA generally prohibits pay discrimination based on sex or race and also prohibits retaliation against an applicant for refusing to provide salary history information.

Pay Discrimination Based on Sex or Race is Prohibited

The CFEPA took effect September 1 and applies to both public and private employers. There is no exception for small employers. The law states that an employer:

may not pay any of its employees at wage rates less than the rates paid to employees of another sex or race for equal work within the same establishment on jobs the performance of which requires equal skill, effort, education, experience, and responsibility, and performance under similar working conditions…

However, similar to the federal Equal Pay Act — which prohibits pay discrimination based on sex only — wage disparities are permissible under the Alabama law if the disparity is due to (1) a seniority system, (2) a merit system, (3) a system that measures earnings by quantity or quality of production or (4) a differential based on any factor other than sex or race.

Individuals who believe they are being paid less than someone of a different gender or race performing the same work may bring a lawsuit in state court under the CFEPA or in federal court under the Equal Pay Act (EPA). If a plaintiff prevails under this provision of the CFEPA, as well as under federal law, the plaintiff must repay the employer one of the two “recoveries,” whichever is less. In other words, the law prohibits plaintiffs from receiving two sets of damages for the same alleged harm.

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Inquiries about Salary History 

The second major prohibition in the CFEPA relates to salary history, stating:

An employer shall not refuse to interview, hire, promote, or employ an applicant for employment, or retaliate against an applicant for employment because the applicant does not provide wage history. . .

“Wage history” is defined as wages paid to the applicant by a current or former employer. This provision is meant to decrease the chance that a new employer will continue the pay gap created by former employers between employees of different races or different genders. Often, employers determine a new applicant’s pay rate based on their pay rate at their former job. If women and minorities are being paid less than their peers at one job, then using their former pay rate to determine their new pay rate could continue the pay gap cycle.

For instance, if Employer XYZ pays its male workers in Department A $12.00 per hour, then it should pay its new female worker, Mary, in Department A $12.00 per hour (assuming there is no other legitimate reason for the disparity) even if Mary previously only made $9.00 per hour at her former job. Employer XYZ may be tempted to offer Mary $10.00 per hour instead of $12.00 based on her prior salary history.

The CFEPA doesn’t prohibit employers from asking about wage history on an application or during an interview. However, if an applicant refuses to provide the information and fails to get the position, the applicant could bring a claim under the CFEPA arguing that they were not hired because of their refusal to provide wage history information.

The federal EPA does not address questions about salary history or use of salary history in determining compensation. Recently, the U.S. Court of Appeals for the Ninth Circuit held that the EPA prohibits employers from basing compensation decisions solely on salary history, but the U.S. Supreme Court vacated that decision for other reasons.

Other Provisions of the CFEPA

Pleading
An applicant or employee who brings an action under the CFEPA against an employer “must plead with particularity in demonstrating . . . [that he or she] was paid less than someone for equal work despite possessing equal skill, effort, education, experience, and responsibility,” and that the differential was not covered by one of the exceptions (for example, a seniority system).

Damages
An applicant or employee who prevails on a claim under the Alabama CFEPA can recover lost wages plus interest.

Recordkeeping
The CFEPA also requires Alabama employers to maintain records in accordance with regulations issued by the U.S. Department of Labor in connection with the federal Fair Labor Standards Act.

Statute of limitations
The statute of limitations to bring an action under the retaliation provision is two years “after the act of discrimination giving rise to a cause of action.” The statute of limitations for wage claims is also two years pursuant to Alabama Code 6-2-38(m).

There is no express statute of limitations for pay discrimination claims, as opposed to retaliation claims. Under the federal Lilly Ledbetter Fair Pay Act, which applies to pay discrimination claims brought under the Equal Pay Act and Title VII, each paycheck that contains discriminatory compensation is a separate violation regardless of when the discrimination began.

Recommendations for Employers 

Employers with operations in Alabama should review their payroll records, recordkeeping and pay practices, and new applicant paperwork to ensure compliance with the CFEPA:

  • Payroll Records: Review payroll records for current employees to ensure that employees in the same department performing the same work are receiving the same pay rate. If there is a disparity of pay rates, document a legitimate reason for the different rates such as seniority, merit, quantity or quality of production, or other differential not based on sex or race.
  • Recordkeeping and Pay Practices: Review your recordkeeping policies to ensure that you are in compliance with the recordkeeping provisions of the Fair Labor Standards Act. The CFEPA incorporates those provisions into the law and requires employers to maintain records to prove they are not in violation of CFEPA’s provisions prohibiting pay discrimination based on sex or race.
  • New Applicant Paperwork: Although the CFEPA does not prohibit employers from continuing to ask for salary history, employers are encouraged go the extra step and remove those questions from application forms to avoid retaliation claims.

Brooke Nixon is a partner in the Birmingham office of Constangy, Brooks, Smith & Prophete, LLP. She can be reached at bnixon@constangy.com.

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