[Code of Federal Regulations]
[Title 29, Volume 4]
[Revised as of July 1, 2008]
From the U.S. Government Printing Office via GPO Access
[CITE: 29CFR1620.26]

[Page 319-320]
 
                             TITLE 29--LABOR
 
          CHAPTER XIV--EQUAL EMPLOYMENT OPPORTUNITY 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 ``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

[[Page 320]]

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.