How Does The Supreme Court’s Latest Opinion on LGBT Workplace Rights Potentially Impact Pay Equity?

Zev J. Eigen, Founder & Chief Data Scientist, Syndio, June 18, 2020

On Monday, in a 6 to 3 decision, the Supreme Court wrote that “[w]hen an employer fires an employee for being homosexual or transgender, it necessarily intentionally discriminates against that individual in part because of sex.” This is important because it means that under federal anti-discrimination law, the phrase “because of sex” extends to individuals discriminated against because of their sexual orientation or because they are transgender.

For years, courts have disagreed about whether the word “sex” as used in the 1964 statute, Title VII of the Civil Right Act, covers being gay or trans. The majority opinion, written by Justice Gorsuch and signed on to by Justices Roberts, Ginsburg, Breyer, Sotomayor and Kagan, rejected a few stalwart arguments set forth by the employers/defendants in this case, which have been made numerous times over the years. Specifically, the court wrote that even though “few would have expected Title VII to apply to discrimination against homosexual and transgender persons” in 1964, “legislative history has no bearing here, where no ambiguity exists about how Title VII’s terms apply to the facts.” The court also rejected employers’/defendants’ argument that the court should avoid legislating this important issue from the bench—that it should leave it up to Congress to decide whether to amend the law if it wishes to do so, explaining that that was not what was happening here, and that Title VII had been extended by courts to other important areas of well-established applications of Title VII like sexual harassment.

Lastly, the majority rejected the arguments made by dissenting justices Alito and Kavanaugh that Title VII enumerates a specific list of protected characteristics: race, color, religion, sex and national origin, and that “[b]ecause homosexuality and transgender status can’t be found on that list and because they are conceptually distinct from sex,” that they are implicitly excluded from Title VII’s reach. The court reasoned that even though orientation and transgender status are distinct concepts from sex, discrimination based on orientation or transgender status necessarily entails discrimination “based on sex.” The court says that “the first cannot happen without the second.”

How Could This Impact Pay Equity?

Like Title VII, the Federal Equal Pay Act forbids employers from discriminating “on the basis of sex.” It also references comparing compenation with the “opposite sex.” Most states that have passed their own versions of pay equity laws mirror the language of the federal law often using the exact phrasing, “on the basis of sex” and referencing the “opposite sex.” This includes the states like Florida, Illinois, Indiana, Michigan, Minnesota, among others. Other states like Arizona, Delaware and California reference “the opposite sex.” The question for at least some of these states is whether the reasoning and plain text construction set forth by the Supreme Court do apply and, should apply to pay equity laws. If that is the case, then, by the extension of the logic and reasoning of the clear interpretation mandate of this decision, pay equity laws might now extend to cover sexual orientation and transgender status. 

Navigating the Scylla and Charybdis of Pay Equity based on Orientation and Gender Identity

The normative question of whether pay equity laws should cover sexual orientation and transgender status is more difficult than it may seem at first glance, even for champions of equal rights. Some states’ pay equity laws currently cover these protected categories: In New Jersey, New York and Iowa (both), Colorado and Oregon (orientation only) and Maryland (gender identity only), well-intentioned employers often struggle to audit for pay equity compliance based on orientation or gender identity for lack of data. Do the laws in these states incent employers to poll employees to ascertain their gender identities and orientation for the purpose of ensuring compliance with state laws? If employers do not poll employees on these topics, how would an employer avoid pay equity liability if sued? How would an employer defend itself without the data on which to compare compensation rates?

If the new Supreme Court opinion applies to the majority of jurisdictions, these same challenges would apply more universally. In addition to placing well intentioned employers in a tough spot, it similarly places states in a difficult legislative position too. States could clarify their laws to say that they intended to include or exclude orientation and gender identity in using the words “on the basis of sex” (or similar).  If they elect to exclude such protected categories, they seem to be stating that it is tolerable for employers to discriminate based on those categories, which is reprehensible. However, if they clarify the language to include these protected categories, they could place an undue and perhaps unintended burden on employers who don’t want to poll employees to obtain the necessary information on which to base a pay equity review. 

Perhaps one creative technological solution for states that want to navigate between these perilous options is to allow employers to use software vendors like Syndio Solutions to gather and analyze employee data blindly on behalf of employers and use the output to inform how to reasonably remediate if statistical anomalies are detected based on orientation or gender identity. Even in situations in which small numbers of people in each category defy traditional statistical review, software solutions like Syndio’s PayEQ enable bootstrapped analysis that offer insights to ensure compliance.

The Arc of Justice

This decision is a monumental stride in the right direction; it represents a long and hard-fought legal victory. On the battlefield for equality and justice, there are monumental wins like this decision that appear on the covers of newspapers, and there are everyday victories like when an organization takes tangible actions to change decision-making processes to improve meaningful diversity, equity and inclusion.This opinion may offer justification for HR leaders trying to do the right thing as far as expanding pay equity beyond gender and race to include orientation and gender identity. 

Before this opinion, employees should have been justifiably more concerned about an employer surveying them about these topics, or even conducting such a survey with an outside entity for fear of repercussions and lack of legal protections.  Those employees should be less afraid now. 

HR leaders may now wish to consider how best to communicate with employees about the need to collect data to ensure that the company is paying everyone fairly and equitably based on all protected categories including orientation and gender identity, to inform them of their rights under Title VII, and assure them of the legitimate and limited purpose of gathering such information. 

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