Hiring decisions need not be intentionally discriminatory in order to be punishable, a federal judge ruled in a landmark Vermont case Wednesday.
U.S. District Judge William K. Sessions III also concluded that men’s negotiating prowess is no excuse for paying them more than women for similar work.
The case of Wendie Dreves v. Hudson Group Retail, LLC, began in 2011 when Dreves accused her former employer of unfairly paying her less than it ultimately paid her male replacement. It was the first test for Vermont’s Equal Pay Act, which was passed in 2002 but had never before been considered comprehensively by the courts.
Sessions granted summary judgment for Dreves’ claim of unequal pay. The money she’s entitled to receive will be decided either through settlement between Dreves and the airport retail chain or through a jury trial. Additional claims of age and gender discrimination, as well as breach of contract, were dismissed by Sessions. Dreves was awarded some compensation for unpaid wages.
But the case likely has much wider implications beyond Dreves and Hudson News.
If an employer is not going to pay a man and a woman the same wages for the same job, that decision must be justified with “bona fide business reasons,” said Cary Brown, executive director of the Vermont Commission on Women.
In his ruling, Sessions pointed out that state and federal law are generous to employers in allowing discretion for pay and hiring decisions. In addition to seniority, merit or the quality or quantity of an employee’s work, bosses can explain pay gaps between men and women by “any factor other than sex.”
“This final defense is a broad one,” he wrote, “but it is not a license to assert any factor under the sun.”
The Dreves case
Dreves’ attorney, Burlington-based John Franco, said the case was a “real education … in the frustration that can befall women” who fight for equal pay.“Patriarchy is not only modeled in our society, it’s homogenized,” Franco said. “It’s so prevalent we don’t even see it. It really takes a case like this to draw it out.”
Hudson News attorney Joseph Kernan, a Philadelphia-based partner with the global law firm DLA Piper, declined to comment on the case.
Vermont Law School professor Cheryl Hanna, who watched the lawsuit closely and filed an amicus brief for Dreves in conjunction with the Commission on Women, said the ruling did not find the company intended to discriminate.
“But their decision resulted in a bad outcome,” Hanna said.
Dreves, of Grand Isle, worked for Hudson News as general manager of its retail operation at Burlington International Airport from Sept. 22, 2003, until her termination on Sept. 8, 2010. During that time, management granted Dreves several raises; her base salary climbed from $34,365 to $48,230. She had 16 years of retail management experience before joining Hudson.
Despite the raises and some favorable reviews, Dreves was fired in 2010, at age 58, following two company investigations and complaints by employees who charged that some of her behavior was abusive and inappropriate.
She left without pay for three days of work and two weeks of unused vacation time. She initially charged that she had been wrongfully terminated, but later withdrew that claim.
Meanwhile, Jarrod Dixon, an employee at Hudson’s Manchester, N.H., operation, was being recruited as Dreves’ replacement, court records say. At 42, Dixon had served in lesser management roles for Hudson since joining the company in 2004.
Dixon’s salary of $36,575 would have received a considerable bump had he accepted Hudson’s first offer of $50,000 to transfer to Burlington, according to court records. Dixon held out for more money to justify moving his family to another state. He wanted $55,000, and the parties eventually met halfway at $52,500.
Hudson had no “generally applicable policy or practice of equalizing the after-tax income of its employees to account for variations in state income rates,” according to the court ruling. The calculations managers used to determine Dixon’s anticipated Vermont taxes were faulty, Sessions wrote, and no record of the method used to determine a cost of living differential could be produced.
Furthermore, the judge found, offering a salary premium to Dixon to compensate him for moving his family was not a valid business-related expense — especially because Hudson provided a $5,000 moving stipend.
There is “simply no basis for the proposition that a male competitor’s ability to negotiate a higher salary is a legitimate business-related justification to pay a woman less,” Session concluded. “To hold otherwise would eviscerate the federal and Vermont equal pay provisions.”
Dreves must now decide whether to settle out-of-court for damages, which Franco said will include attorney fees at least in the high five-figures. Barring settlement, the plaintiff can pursue a jury trial.
Hudson News also has the option to appeal, although Hanna sees dim prospects for that, given favorable precedents for plaintiffs in similar cases heard by the 2nd Circuit Court of Appeals.
State and federal law
Brown, of the Commission on Women, said there is great reassurance in Sessions’ ruling because it affirms the recently passed H.99, a law strengthening the state’s equal pay provisions, some of which takes effect July 1.
“Judge Sessions interpreted the current law in the way that new law makes clear,” she said. “So it won’t need to be interpreted in the courts again.”
Still more resonance from the Dreves case stems from its consideration by a federal district court. Because Hudson News is owned by the Swiss multinational company Dufry AG, rather than a Vermont-based business, the case was heard by a federal court that applied state law.Although only legally binding within Vermont, Hanna said, the Dreves decision “does have broader persuasive value in the federal court system.”
A federal Paycheck Fairness Act that would accomplish many of the same objectives has been faltering in Congress for years, Brown said. “If they passed that, the entire country would have this same clarification,” she said.
For employees and employers
Brown encouraged employees who feel they may be the victims of gender-based pay discrimination to pursue their options with several state resources: the Attorney General’s Office , the Vermont Commission on Women and (for state employees) the Human Rights Commission.
Both men and women can be the subject of pay discrimination, and Hanna pointed out that the law as written and interpreted applies to both.
Hanna also encouraged employers to conduct “pay audits” to ensure compliance with state and federal wage laws.