In O’Reilly v. Daugherty Systems, the U.S. Court of Appeals for the Eighth Circuit[1] ruled that, for purposes of the Equal Pay Act (EPA) claim, greater experience can serve as a legitimate reason for a pay differential on March 29, 2023. Affirming the district court’s grant of summary judgment for the defendant, the Eighth Circuit held that differences in skillset and experience between a plaintiff and a single comparator can establish that a pay disparity between them was based on a factor other than sex, an affirmative defense to an EPA claim. The recent decision adds one more notch in the developing question of what constitutes a legitimate reason for pay differences under the EPA.

O’Reilly v. Daugherty Systems

The plaintiff, Tamara O’Reilly, began working for Daugherty Systems as a senior manager in 2014 with a starting base salary of $135,000. Within three years, after several pay raises and promotions, O’Reilly’s base salary had moved up to $200,000 and she received the title of director/client partner. That same year, Daugherty Systems hired Drew Davis as a new director/client partner, offering him a starting base salary of $275,000. However, despite the topline $75,000 difference in base salary, the actual difference between O’Reilly’s annual pay and Davis’s was under $10,000, because, unlike Davis, O’Reilly received overtime compensation and had a substantially higher incentive compensation plan.

As directors/client partners, O’Reilly and Davis not only shared identical job titles but performed duties that were “substantially the same.” Because of the identical job titles and considerably equal roles, the Eighth Circuit agreed with O’Reilly that she was able to make a prima facie showing of an EPA violation.

The Eighth Circuit next turned to the question of whether legitimate reasons for pay differences existed, addressing the employer’s stated claim that Davis’s experience and unique client relations skills dictated the salary difference. On this inquiry, the panel did not find O’Reilly’s evidence sufficiently strong to overcome Daugherty’s affirmative defense. While O’Reilly attempted to show that she had unique skills warranting equal pay, the court emphasized that O’Reilly was newer to the role of client relations and that Daugherty had intentionally made an investment in O’Reilly by elevating her despite her inexperience. Noting that Eighth Circuit precedent allows for education or experience as a “permissible factor” for pay disparities, the court held that the district court had properly granted summary judgment to Daugherty because “no reasonably jury” could find for the plaintiff.

Takeaway

The decision in O’Reilly v. Daugherty Systems is an important reminder that the courts accord some flexibility to employers to account for various differences in experience and skill in making pay decisions. Many recent changes in state law (i.e., California’s Fair Pay Act) have narrowed the test for employers to prove that salary differences are based on factors other than sex. The Eighth Circuit’s decision is a useful reminder that employers with documented and legitimate reasons for pay differences are able to prevail in court. Moreover, in affirming the district court’s grant of summary judgment on the issue, the Eighth Circuit’s decision is notable for showing that an employer’s reasoning for pay differences may not necessarily be required to confront a jury. The U.S. Court of Appeals for the Second Circuit will soon be addressing a similar issue in Eisenhauer v. Culinary Institute of America, 2d Cir., No. 21-02919. Like the Eighth Circuit, its predecessor case, Eisenhauer v. Culinary Inst. of Am., No. 19 CIV. 10933 (PED), 2021 WL 5112625 (S.D.N.Y. Nov. 3, 2021), held that although the plaintiff could allege a prima facie violation of the EPA, a nondiscriminatory basis existed for the pay disparity, defeating the plaintiff’s EPA claim at the summary judgment stage. Depending on the final outcome of that case, we may see further variance amongst the circuits on the question of whether an employer’s reasoning for pay differences must be decided by a jury.


[1] The Eighth Circuit has appellate jurisdiction over federal courts in Arkansas, Iowa, Minnesota, Missouri, Nebraska, North Dakota, and South Dakota.

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Photo of Abdul Kallon Abdul Kallon

Abdul Kallon represents clients in high-stakes litigation, including general commercial litigation and labor and employment matters. His practice is informed by deep experience gained as a practitioner and as a judge of the U.S. District Court for the Northern District of Alabama. For…

Abdul Kallon represents clients in high-stakes litigation, including general commercial litigation and labor and employment matters. His practice is informed by deep experience gained as a practitioner and as a judge of the U.S. District Court for the Northern District of Alabama. For more than 12 years, he presided over a broad range of civil and criminal cases, including employment, commercial litigation, and constitutional rights matters.

Photo of Chris Wilkinson Chris Wilkinson

Chris Wilkinson maintains a broad litigation and advice practice in labor and employment, wage-and-hour, federal contractor compliance, equal pay, government relations, and administrative law. He represents multinational employers, advising and counseling on the full range of employment and compliance matters arising out of…

Chris Wilkinson maintains a broad litigation and advice practice in labor and employment, wage-and-hour, federal contractor compliance, equal pay, government relations, and administrative law. He represents multinational employers, advising and counseling on the full range of employment and compliance matters arising out of federal and state laws.

Chris’ current practice focuses on counseling employers and litigating pay equity matters arising out of federal and state claims. He helps clients navigate large-scale government investigations and litigation arising out of discrimination, retaliation, whistleblower, and other enforcement matters. He also investigates highly sensitive matters at the executive level, ensures legal compliance in diversity and inclusion efforts, and strategizes regarding labor and employment risks arising out of the COVID-19 pandemic.

Photo of Jeremy Wright Jeremy Wright

Jeremy Wright is a graduate of the Northwestern University Pritzker School of Law, where he served as the online managing editor of the Northwestern University Law Review. While in law school, he was a clinical student at the Donald Pritzker Entrepreneurship Law…

Jeremy Wright is a graduate of the Northwestern University Pritzker School of Law, where he served as the online managing editor of the Northwestern University Law Review. While in law school, he was a clinical student at the Donald Pritzker Entrepreneurship Law Center and at the Center on Wrongful Convictions, a teaching assistant, and an OUTLaw/LAGBAC representative.