[Code of Federal Regulations]
[Title 29, Volume 4]
[Revised as of July 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 29CFR1620.26]

[Page 303-304]
 
                             TITLE 29--LABOR
 
                               COMMISSION
 
PART 1620--THE EQUAL PAY ACT--Table of Contents
 
Sec. 1620.26  Red circle rates.

    (a) The term ``red circle'' rate is used to describe certain 
unusual, higher than normal, wage rates which are maintained for reasons 
unrelated to sex. An example of bona fide use of a

[[Page 304]]

``red circle'' rate might arise in a situation where a company wishes to 
transfer a long-service employee, who can no longer perform his or her 
regular job because of ill health, to different work which is now being 
performed by opposite gender-employees. Under the ``red circle'' 
principle the employer may continue to pay the employee his or her 
present salary, which is greater than that paid to the opposite gender 
employees, for the work both will be doing. Under such circumstances, 
maintaining an employee's established wage rate, despite a reassignment 
to a less demanding job, is a valid reason for the differential even 
though other employees performing the less demanding work would be paid 
at a lower rate, since the differential is based on a factor other than 
sex. However, where wage rate differentials have been or are being paid 
on the basis of sex to employees performing equal work, rates of the 
higher paid employees may not be ``red circled'' in order to comply with 
the EPA. To allow this would only continue the inequities which the EPA 
was intended to cure.
    (b) For a variety of reasons an employer may require an employee, 
for a short period, to perform the work of a job classification other 
than the employee's regular classification. If the employee's rate for 
his or her regular job is higher than the rate usually paid for the work 
to which the employee is temporarily reassigned, the employer may 
continue to pay the higher rate under the ``red circle'' principle. For 
instance, an employer who must reduce help in a skilled job may transfer 
employees to less demanding work without reducing their pay, in order to 
have them available when they are again needed for their former jobs. 
Although employees traditionally engaged in performing the less 
demanding work would be paid at a lower rate than those employees 
transferred from the more skilled jobs, the resultant wage differential 
would not constitute a violation of the equal pay provisions since the 
differential is based on factors other than sex. This would be true 
during the period of time for which the ``red circle'' rate is bona 
fide. Temporary reassignments may also involve the opposite relationship 
of wage rates. Thus, an employee may be required, during the period of 
temporary reassignment, to perform work for which employees of the 
opposite sex are paid a higher wage rate than that paid for the duties 
of the employee's regular job classification. In such a situation, the 
employer may continue to pay the reassigned employee at the lower rate, 
if the rate is not based on quality or quantity of production , and if 
the reassignment is in fact a temporary one. If, however, a piece rate 
is paid employees of the opposite sex who perform the work to which the 
employee in question is reassigned, failure to pay the reassigned 
employee the same piece rate paid such other employees would raise 
questions of discrimination based on sex. Also, failure to pay the 
higher rate to a reassigned employee after it becomes known that the 
reassignment will not be of a temporary nature would raise a question 
whether sex rather than the temporary nature of the assignment is the 
real basis for the wage differential. Generally, failure to pay the 
higher rate to an employee reassigned for a period longer than one month 
will raise questions as to whether the reassignment was in fact intended 
to be temporary.