What to Do When “A New Employee Is Being Paid More Than Me”

Employee upset at computer because new employee is being paid more than them

Imagine the following: During a conversation with a new hire in your department, the discussion turns to your respective salaries. To your surprise, you learn that the new employee’s starting wage is higher than what has taken you ten years to earn.

Resentment, frustration, anger, and shock may all flood you simultaneously. You might even feel as though your employer has betrayed you. “Why is the new employee being paid more than me when I’ve been here for years?” is likely your first thought. However, you may also question the legality of your employer’s actions and what legal recourse may be available to you.

Learning of wage disparities can be unsettling, but there can be a legitimate reason behind the new employee’s greater pay rate. That said, it is vital that you understand what those permissible reasons are because pay disparity can be illegal, and should it occur, it is ultimately up to you to recognize it and take action.

The Legality of Pay Disparity

Person using magnifying glass to examine pay disparity, represented by stacks of coins

Federal and state laws, such as Title VII of 1964 (Title VII) and the Equal Pay Act (EPA), limit employers’ abilities to pay employees differently for performing the same work. For instance, an employer cannot pay two employees differently based on protected characteristics such as gender, nationality, or race.

Nevertheless, just because a new employee is being paid more than you does not automatically mean that your employer is partaking in illegal activity. Employers can compensate new employees at higher rates than existing employees for various reasons, some of which may be specific to the employee, while others may have more to do with the pre-existing labor market.

Below is a deeper exploration of both the lawful and unlawful reasons why pay disparity might occur, as well as the legal rights you have in the case of illegal pay disparity.

What Is Salary Compression?

One reason a new employee may be getting paid more than you could be due to salary (or wage) compression, which occurs when the labor market makes hiring certain employees more expensive. In turn, it requires employers to pay a higher starting wage for new employees, who then begin work at a wage similar to or greater than the wage that current employees in the field are earning.

For example, suppose you were hired as a cashier five years ago at a then-competitive rate of $10.00 per hour. In that time, you received five performance increases of $0.25 each, resulting in a current wage of $11.25 per hour.

However, forces in the job market outside your employer’s control, such as an increased demand for workers, are making it so that they must pay a higher wage to new hires or risk not having employees to operate their business. As such, they cannot hire a new cashier candidate for anything less than $12.00 per hour.

Other Factors Contributing to Pay Disparity

Other reasons for a pay disparity might not be readily apparent. For instance, the following aspects may apply to the new candidate:

  • They have extended experience in the field or relevant on-the-job training.
  • They possess greater formal, relevant education than other employees.
  • They are fluent in another language.
  • They have an in-demand specialization.

These factors, along with salary compression, are generally regarded as legitimate reasons for pay disparities to arise. Though it may seem unfair to you and your fellow employees, there is generally little in the way of legal recourse.

Can a Company Pay a New Employee More Without Explaining Why?

Perhaps the more prominent sticking point of pay disparities is that your employer may get away with keeping wage negotiations confidential with new employees, most often to avoid wage disputes and having to address existing employees’ lower pay. In reality, however, employers are often powerless to stop the practice of employees discussing their wages. In fact, under the National Labor Relations Act (NLRA), employees have the right to communicate with their coworkers about their wages. If you are an employee covered by the NLRA, you may discuss wages in face-to-face conversations, over the phone, and in written messages. Policies that specifically prohibit the discussion of wages are unlawful, as are policies that discourage employees from discussing their wages.

However, some regions of the country have enacted pay-scale disclosure laws that require transparency. For example, in Colorado and New York City there are pay scale disclosure laws requiring businesses to include the minimum and maximum pay range in their job advertisements.

Regardless of whether employers choose to openly discuss the reasons for pay disparities, they must be prepared to explain them if a lawsuit is filed against them. Employers who get it wrong may face serious consequences.

Common Reasons Employers Give for Pay Disparity

Employee arguing with employer about new employee being paid more

If you believe that a new employee is being paid a wage that is similar to or, in fact, higher than yours, you might ask your employer why such an unfair distinction exists.

In response, most employers will offer one of the following reasons:

  • The new employee has greater experience or a unique skill.
  • The job market is tough, and the new employee’s higher wage was necessary to remain competitive.
  • The new employee’s job requires more skill, effort, and responsibility.

These reasons are generally lawful explanations as to why a new employee is receiving a higher wage than you. Still, evidence may show that another reason motivated the employer’s decision to offer the new employee a higher raise, and that may not be legal.

When Pay Disparity Is Illegal

Your employer does not have an unlimited right to pay a new employee a higher wage than you or existing employees, even in a right-to-work state like Florida. With that said, some examples of unlawful reasons for a pay disparity that may subject an employer to legal repercussions include the following:

Discrimination Based on Protected Categories

As mentioned, Title VII forbids your employer from paying a new employee more than their existing employees based on race, national origin, religion, gender, color, ethnicity, disability, pregnancy, or any other protected classification under Title VII. Large employers who pay women and other historically marginalized groups less for the same or substantially similar work often receive a lot of media attention for these discriminatory practices.

The Equal Pay Act

The EPA protects against wage discrimination based on sex. Under the EPA, if there is an inequality in wages between people of different sexes who perform substantially equal jobs, employers must raise wages to equalize pay but may not reduce the wages of other individuals.

Retaliation for Protected Activities

Any individual who files a charge of discrimination or an equal pay claim is protected against unlawful retaliation by their employer. This protection extends to unlawful retaliation by an employer against an individual for opposing employment practices that allegedly discriminate based on compensation or for filing a discrimination complaint, testifying, or participating in any way in an investigation, proceeding, or litigation under Title VII or the Equal Pay Act.

Under the NLRA, when you and another employee have a conversation or communication about your pay, it is unlawful for your employer to punish or retaliate against you for having that conversation. It is also unlawful for your employer to interrogate you about the conversation, threaten you for having it, or put you under surveillance for such conversations. Additionally, it is unlawful for the employer to have a work rule, policy, or hiring agreement that prohibits employees from discussing their wages with each other or requires you to get the employer’s permission to have such discussions.

Collective Bargaining Agreements and Contracts

Lastly, pay discrimination is unlawful if it violates any private employment contract or agreement the employer entered into. For example, workplaces governed by a collective bargaining agreement might be limited on what wage they can offer to a new employee. Even if the employer has a legitimate reason for offering a higher wage, violating these private agreements can still subject the employer to civil penalties and damages.

Legal Recourse for Discriminatory Pay Disparity

Man sitting at desk upset reading letter

It is doubtful that a new hire will be completely aware of the reasons why your employer agreed to pay them the wage they did or what others are paid. That said, approaching HR or management about the issue is the more appropriate first step instead of confronting the new worker about their pay rate.

Listen to their reasons for the disparity and evaluate whether they sound legal and legitimate. A legal reason is one the law recognizes as permissible, such as offering a higher wage to a better-qualified candidate. And a legitimate reason is backed up by evidence.

Try to get any reasons offered for the pay disparity down in writing so that they can be investigated later, and make sure to do the same with any follow-up correspondence from your employer as well. Future correspondence may include summaries of your meetings or steps your employer intends to take to address the situation. For example, to substantiate an Equal Pay Act claim, there are several elements that must be met. The jobs being compared must require substantially equal skill, effort, and responsibility and be performed under similar working conditions within the same establishment.

If the given reasons for the pay disparity are not legal or not supported by evidence, you can file a pay discrimination lawsuit against your employer.

You’ll need to establish that an unlawful or discriminatory reason is most likely behind the pay disparity. It would then fall to the employer to prove their legitimacy in paying the new hire a higher wage than you and your fellow pre-existing workers.

Calculating Lost Wages and Potential Damages

If you are successful in your pay disparity lawsuit, you are entitled to pursue damages. The potential damages for a violation of the EPA include the amount of wages the employee was underpaid, liquidated damages equal to 100% of the underpaid wages, and reasonable attorneys’ fees and costs. A court may decline to award liquidated damages if the employer shows its actions were in good faith and it had reasonable grounds for believing its actions did not violate the EPA.

Damages available under Title VII include lost wages, front pay, compensatory damages, punitive damages, and reasonable attorneys’ fees.

Consult an Employment Law Attorney

Upon learning that a new employee is making more than you, you might be understandably upset, but knowing how to deal with unfair pay at work is vital, and an investigation is warranted before you take any rash action, like quitting your job or rushing to the courthouse to file a lawsuit. There are legitimate reasons why a pay disparity might arise, and you deserve to know why you are not being paid as much as a new employee.

Wenzel Fenton Cabassa, P.A. can be your employment law advocate throughout the investigative process. With years of experience working with employees whom their employers have wronged, our Florida wage dispute lawyers know what evidence to look for that can support a claim of pay discrimination. We will use our resources and knowledge to get to the bottom of your situation.

When unlawful pay discrimination has occurred, you can trust Wenzel Fenton Cabassa, P.A. to present your claim skillfully and professionally to the court. Our Florida employment law attorneys have handled numerous wage disputes and lawsuits. We will fight for you and your right to compensation if your employer discriminates against you. Contact us today to get started.

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