The U.S. women’s soccer team’s lawsuit for what they claim is equal pay faced a serious setback recently after a federal judge dismissed the players’ claim. His ruling offers a great financial lesson for all aspiring women.
The U.S. women’s national team, or WNT, is one of the most high-profile and beloved sports teams in the world. It has counted four World Cups and four Olympic gold medals among its achievements.
A group of players from the team filed a pay discrimination lawsuit on March 8, 2019, against their employer, the U.S. Soccer Federation. The plaintiffs claimed they suffered “institutionalized gender discrimination” and allegedthey have not been paid equally compared to the men’s national team (MNT). The female players demanded more than $66 million in damage under the Equal Pay Act and Title VII of the Civil Rights Act of 1964.
Since then, the women’s team and its star players, such as Megan Rapinoe, have become visible spokeswomen for the sexual equality movement and have received enthusiastic support from numerous celebrities, politicians, and fans. The team went on to win its fourth World Cup in 2019, celebrating with fans by chanting “Equal Pay!”
Men and Women’s Teams Have Different Pay Structures
To understand the WNT’s lawsuit, we must first grasp their different pay structures. The pay structures for both men and women’s teams are determined by their respective collective bargaining agreements (CBAs), negotiated between their union representatives and representatives from the U.S. Soccer Federation.
The women’s team has two types of players. A non-contract player is paid only when she is called up to the team. A contract player’s compensation includes a $100,000 base pay, incentive-based bonuses (such as win bonuses in qualifying for the World Cup or winning the Olympics), and a percentage of TV deals and ticket sales.
The key feature of the women’s CBA is that contract players receive pay no matter what, even if they don’t get called up for a game or training camp, or when they can’t play due to an injury. The U.S. Soccer Federation also covers these players’ dental and medical insurance, as well as maternity leave.
The players on the men’s team, however, all operate as non-contract players, on a pay-for-play basis. They don’t receive any guaranteed annual salaries or severance pay. They get paid only when they are called onto the team, meaning they do not get paid if they get injured and miss a game. For foregoing any guaranteed financial safety, the men’s CBA provides higher bonus provisions than the women’s CBA does.
Want What the Men Get? Make the Deal They Did
The women’s lawsuit zeroed in on these different bonus structures. Essentially, the plaintiffs argued that the women’s CBA providing lower bonuses than the men’s constituted sex-based discrimination. Female players would have made more money, the lawsuit argued, had they been compensated under the terms of the men’s CBA.
When the U.S. Soccer Federation, employer of both the men’s and women’s teams, pointed out that the female players already received more money than the men’s team on both a cumulative and an average per-game basis from 2015 to 2019 (the class period), WNT plaintiffs countered that was because the women’s team played more games during that period than the men’s team did.
Judge R. Gary Klausner pointed out that during the class period, the WNT played 111 games and made $24.5 million, averaging $220,747 per player. At the same time, the MNT played 87 games and made $18.5 million, averaging $212,639 per player. Based on this data, Klausner concluded, “[T]he WNT did not make more money than the MNT solely because they played more games. Rather, the WNT both played more games and made more money than the MNT per game.”
Regarding the central argument of the lawsuit, which states that women would have made more money had they been paid under the MNT’s collective bargaining agreement, as the men’s CBA offers better bonus provisions than the women’s, Klausner had a lot to say:
One of the defining features of the WNT CBA is its guarantee that players will be compensated regardless of whether they will play a match or not. This stands in stark contrast to the MNT CBA, under which players are only compensated if they are called into a camp and then participate in a match. … [T]here is an indisputable economic value to this type of ‘fixed pay’ contract, as compared to a ‘performance pay’ contract. Indeed, the WNT clearly attached significant economic value to this contractual arrangement because it was willing to agree to lower bonuses in exchange for higher fixed payments in 2017 CBA.
In fact, the women’s team values a guaranteed income so much that according to Klausner, “[T]he history of negotiations between the parties demonstrates that the WNT rejected an offer to be paid under the same pay-to-play structure as the MNT, and the WNT was willing to forgo higher bonuses for benefits, such as greater base compensation and the guarantee of a higher number of contracted players.”
Therefore, Klausner concludes, “[P]laintiffs cannot now retroactively deem their CBA worse than the MNT CBA by reference to what they would have made had they been paid under the MNT’s pay-to-play terms structure when they themselves rejected such a structure.”
As an interesting side note, since the men’s team didn’t perform as well as the women’s team did during this class period, the MNT would have made more money than the women did had they been under the women’s 2017 CBA. In the end, Klausner dismissed the lawsuit’s Equal Pay Act allegation but left intact the claim regarding the Civil Rights Act. A trial is still scheduled for early June, albeit with a much narrower focus.
Financial Security Will Cost You
No matter where you stand on this lawsuit, I encourage you to read Klausner’s ruling carefully — even more than once — because it offers a financial lesson many women don’t pay much attention to: the cost of financial safety.
We all understand the tradeoff between risk and reward: Often, the higher the risk, the bigger the reward. Research reveals a sex difference in risk-taking behaviors. When making financial decisions, men are generally more willing to make risky bets, hoping for a much bigger payoff, consistent with the MNT’s opting for a pay-to-play structure with higher bonuses rather than a guaranteed income. They are willing to risk getting no pay if they are injured or not called up to a game at all. The reward is that when they are healthy and play well, they get an outsized payoff.
Women, on the other hand, generally associate money with security. Therefore, when women make financial decisions, a downside protection is often equally as important as the eventual pay off — if not more so.
In my investment advisory experience, this strong desire for safety often leads female clients to choose safer but lower-return investments. Therefore, I am not surprised the women’s soccer team rejected the performance pay model because it entails too much downside risk. Instead, they opted for a “fixed pay” contract with lower bonuses in exchange for guaranteed base pay and benefits.
In this particular case, female players were not being discriminated against. A lower bonus was the price for achieving the financial security they desired. The price tag seemed acceptable when the contract was signed. But now, that price seems too high because the women’s team has been extremely successful and players could have made much more money in bonuses if they had a performance pay structure.
Comparing fixed pay and performance-based pay is like comparing apples to oranges; one is neither better nor worse than the other. The two systems have different objectives and achieve different desired outcomes, depending what kind of tradeoff participants are willing to make.
For all working women out there, if you ever become involved in a compensation negotiation with your employer and are offered the choice between these two types of pay structures, choose the one you are comfortable with. Just remember, financial security is not free. It has a price tag. It doesn’t matter whether you are a man or a woman, if seeking maximum financial payoff is your goal, you have to forgo security and be willing to live with the risk of “all or nothing.”