by Mark I. Schickman

The confluence of two new laws creates a dangerous circumstance for employers. The trend toward transparent employment practices now requires many employers to create and publish wage ranges for every job. Once wage ranges are widely known, California’s Equal Pay Act (EPA) makes it very easy for a female employee who wasn’t paid the same as an arguably comparable male counterpart to proceed to trial on an EPA claim, even when all of her surrounding claims are rejected on the facts.

Staples Tries to Make Dismissal Happen

Joyce Allen began working for Staples in October 2006 as a sales representative. In March 2015, she took a position as an outside facilities area sales manager (ASM), a position she held until June 2017.

As an ASM, Allen “oversaw a team of [s]ales [r]epresentatives who were responsible for contracting with [business customers and] overseeing . . . and managing client relationships and business sales of Staples products.” Charles Narlock, a field sales director (FSD), supervised Allen and the other ASMs in the Pacific region.

In June or July 2017, Allen became an FSD. In that position, she reported to area sales vice president Bruce Trahey, as did Narlock. In February 2019, as part of a corporate reorganization, Trahey informed Allen and several other FSDs he had decided to eliminate their positions and terminate their employment.

In March 2019, Allen filed six claims against Staples:

• Violation of the EPA;
• Gender discrimination under California’s Fair Employment and Housing Act (FEHA);
• Sexual harassment under the FEHA;
• Failure to prevent discrimination and harassment under the FEHA;
• Retaliation under the FEHA; and
• Wrongful termination in violation of public policy.

After a year of litigation, Staples and Narlock asked the court to dismiss the claims, saying Allen had no facts on which to base her complaint, had no legal claim against Staples’ parent corporation or Narlock, and her discrimination claims were time-barred because she filed no Department of Fair Employment and Housing (DFEH) administrative complaint within one year of the date her claims occurred. The trial court dismissed the case, and Allen appealed.

Comparative Wage History

For the EPA claim, Allen’s and Narlock’s wage histories were critical. When Allen became an ASM in March 2015, it was a grade 37 job position with an annual salary range between $65,000 and $135,000. Staples set her base salary at $84,999 and increased it to $86,912 in April 2017. Narlock, who was an ASM before being promoted to an FSD, had a base salary in grade 37 of $107,698. That was approximately $22,000 more in base salary than Staples paid Allen when she started in the position.

In July 2017, when Allen became an FSD, it was a grade 38 position with an annual salary range between $80,000 and $160,000. Allen’s annual base salary in that position was set at $86,912, the same salary she had been earning as an ASM, and it remained at that rate until her February 2019 termination. Narlock’s base salary in his grade 38 FSD position was $135,000—$48,087 more than Allen’s FSD base salary. In May 2016, Narlock’s base salary increased to $140,451, the amount he was making when Allen became an FSD in June 2017.

Staples argued the overall evidence showed its policies favored women. During the period Allen held her ASM position, there were two other ASMs in California: a man who earned between $109,999 and $111,099 and a woman who earned between $124,071 and $127,818. Although Staples had fewer female ASMs in the United States during that period, women were among the highest earning ASMs. And at least six men earned less than Allen.

The salary data for FSD employees during the time Allen held the position showed five women earned more in base salary than several of the men, and at least three men earned less in base salary than Allen.

Different Rates Enough to Trigger Statute

The EPA says in pertinent part:

No employer shall pay any individual . . . wage rates less than the rates paid to employees of the opposite sex in the same establishment for equal work on jobs the performance of which requires equal skill, effort, and responsibility, and which are performed under similar working conditions, except where the payment is made pursuant to a seniority system, a merit system, a system which measures earnings by quantity or quality of production, or a differential based on any bona fide factor other than sex.

To prove a prima facie (presumptive) case of wage discrimination, “an employee must establish that, based on gender, the employer pays different wages to employees doing substantially similar work under substantially similar conditions.” If that is done, the burden shifts to the employer to prove the disparity is permitted by one of the EPA’s four statutory exceptions, including a factor other than sex. Allen had to show “not only that she [was] paid lower wages than a male comparator for equal work, but that she [had] selected the proper comparator.”

Staples’ evidence showed that female ASMs were paid more, on average, than men and that some male ASMs and FSDs were paid lower salaries than Allen. According to the company, that undisputed evidence established it didn’t pay males more than it paid females in similar positions. In response, Allen showed that Narlock—an appropriate male comparator in the Pacific region—was paid more in base salary, as both an ASM and an FSD, than she was paid in those positions.

To get her case to a jury, Allen needed to establish only that she was paid differentially because of her sex with respect to a single male employee. Her evidence—that she was paid $22,000 less in base salary than Narlock as an ASM and $48,000 less in base salary as an FSD—was enough to carry her initial burden on her EPA claim and shift to Staples the burden of showing there was no triable issue of fact on one of the four exceptions to that claim.

Staples argued that the salary differentials between Narlock and Allen were explained by bona fide factors other than gender—namely, Narlock’s time with the company and his experience before taking both positions. But its evidence showed only that as a general practice, it set salaries based on factors such as seniority, years of experience in a given position, and merit. It did not set forth the specific factors on which Narlock’s base salary, in either position, was premised or the factors on which Allen’s base salaries were premised.

Absent such evidence, Staples failed to establish there was no triable issue of fact on its “other bona fide factors” defense. The trial court therefore erred in dismissing Allen’s EPA claim.

All Other Claims Dismissed

Allen also made claims of sex discrimination, sexual harassment, and retaliation, but the court of appeal approved their dismissal.

Allen argued her preliminary showing of a pay disparity in support of her EPA claim also established sex discrimination. But the court found that a showing of pay disparity, by itself, did not satisfy her burden under the discrimination laws to make a causal connection between the disparity and her gender. She also was required to submit competent evidence of some circumstance suggesting Staples paid her less than Narlock because of her gender, which she did not do.

Similarly, Allen established no claim that she was fired in retaliation for her EPA claim:

To establish a prima facie case of retaliation under the FEHA, Allen must show (1) she engaged in a “protected activity,” (2) Staples subjected her to an adverse employment action, and (3) a causal link existed between the protected activity and the employer’s action. Once an employee establishes a prima facie case, the employer is required to offer a legitimate, nonretaliatory reason for the adverse employment action. If the employer produces a legitimate reason for the adverse employment action, the presumption of retaliation “drops out of the picture,” and the burden shifts back to the employee to prove intentional retaliation.

Allen argued that Staples failed to offer her an opportunity to transfer in lieu of termination, which showed there was a triable issue as to whether the company’s proffered justification for her termination was pretextual.

But the undisputed evidence showed that (1) Allen’s position was eliminated because of a corporate directive to restructure the management of Staples’ salesforce and (2) Trahey’s termination decision was based on a ranking formula developed by the company’s HR department and was applied to FSDs companywide.

In response, Allen submitted no admissible evidence that Trahey had been authorized to offer transfers. Absent such evidence, her argument was based on speculation that a transfer was an available alternative to termination.

Allen also argued the factors used to rank her were subjective. Although courts “view with skepticism subjective evaluation methods,” the use of “subjective criteria [is] not wrongful per se.” Her evidence was insufficient.

Finally, Allen claimed sexual harassment, but those claims were time-barred. In 2015, she attended an event at Staples Center at which Narlock touched her buttocks. She didn’t report the incident to the company’s HR department or ask anyone who witnessed it to make a report, and she didn’t speak to Narlock about it afterward. The incident was the only time Narlock touched her inappropriately.

In late 2015, and again sometime during 2016, Narlock shared with Allen lewd sexual comments. But she didn’t report either incident to the HR department. On March 7, 2019—well over a year after the last incident of harassment by Narlock in 2016—Allen filed a complaint with the DFEH alleging, among other things, sexual harassment. Because she filed her DFEH complaint more than one year after the last incident, her FEHA harassment claims were time-barred

Allen also couldn’t raise any claim against Staples’ parent corporation. An employee who seeks to hold a parent corporation liable for the acts or omissions of its subsidiary on the theory that the two corporate entities constitute a single employer has a heavy burden to meet under both California and federal law. Corporate entities are presumed to have separate existences, and the corporate form will be disregarded only when the ends of justice require that result. There is a strong presumption that a parent company isn’t the employer of its subsidiary’s employees.

To prove otherwise, an employee must satisfy the “integrated enterprise” test, which has four factors: interrelation of operations, common management, centralized control of labor relations, and common ownership or financial control. Those factors weren’t present here.

Allen’s claim was sent back to the trial court, with directions to enter a new order denying dismissal of her claim against Staples for violation of the EPA but approving the rest of the trial court’s rulings. Allen v. Staples, Inc. (CA2/5 B311426, filed 9/20/22, ord pub. 10/18/22).

Bottom Line

The text of California’s EPA anticipated the result in this case. Even though Allen’s evidence of discrimination, harassment, or retaliation was insufficient, the equal pay claim was strong enough to get to a jury simply because she was paid less than a male employee in the same job. It will be up to a jury to decide whether the pay disparity was justified by a factor other than gender.

The case underscores the importance of being very specific about the scope of job criteria and preferred qualifications. Once a pay disparity in shown, the burden falls on the employer to prove one of the defenses to liability, so be prepared to justify the high standard or bear the cost of litigation.

Mark I. Schickman is Editor of the California Employment Law Letter and the founder of Schickman Law in Berkeley, California. Mark has successfully litigated almost every type of employment case in the courts before juries and administrative agencies and on appeal and is a popular and engaging trainer providing employment advice to employers across the country. He can be reached at Mark@SchickmanLaw.com.