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Inconsistent Retention Raises May Create Bias Claims

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Employers who want to hold on to good workers in a competitive labor market often look to “retention raises” to keep them in the fold. But a recent decision from a federal appeals court suggests that if employers do so based on overly subjective criteria they could be walking right into a discrimination suit.

The case involved a female professor at the University of Oregon who filed a lawsuit in federal district court accusing the university of committing sex discrimination by paying male professors more than comparable female ones. The trial judge threw out the case, finding that the disparity was a result of retention raises to certain male professors that were “job related” and “consistent with business necessity.”

The professor appealed, however, and the appellate court sent the case back to the lower court to proceed to trial.

As the appellate court noted, female professors did make, on average, $15,000 less than male professors and the disproportionate use of retention raises may indeed have been a key factor. But while the court did not outwardly determine that this was discriminatory, it found that a jury should have an opportunity to figure out whether the disparity was nondiscriminatory or whether there was bias involved in faculty members’ comparative ability to negotiate such a raise. The court also ruled that the plaintiff should be afforded the opportunity to argue that general across-the-board raises could help the university hold onto talented faculty just as well as selectively applied retention raises.

Though the professor has not won her lawsuit at this point, the case sends a message to employers to be sure merit-based salary increases are based on clear criteria that can be documented with hard evidence.