Previous Ruling By 9th Circuit Court Overturned in Rizo v Yovino Case, Prohibits Employers from Using Past Salary to Set Wages
On April 9th, 2018 the 9th Circuit Court of Appeals ruled employers cannot use an applicant’s salary history to justify unequal pay between women and men under the Equal Pay Act (EPA), even if assessed using other job-related factors. This ruling is a reversal of the earlier decision by the 9th Circuit Court of Appeals in Rizo, and seems to hint at a growing disagreement about the issue within the 9th circuit.
The EPA was passed in 1963 to address the gender pay gap and prohibits employers from paying different wages to employees of the opposite sex for work “which requires equal skill, effort, and responsibility, and which are performed under similar working conditions, except where such payment is made pursuant to (i) a seniority system; (ii) a merit system; (iii) a system which measures earnings by quantity or quality of production; or (iv) a differential based on any other factor other than sex.”
Arguments made by the defendant in the Rizo case claim an employee’s salary history is a “factor other than sex” and the “catchall category” has been used to justify pay discrepancies ostensibly based on an applicant’s salary history. However, the Court roundly rejected this argument and held that, “prior salary alone or in combination with other factors cannot justify a wage differential. To hold otherwise—to allow employers to capitalize on the persistence of the wage gap and perpetuate that gap ad infinitum—would be contrary to the text and history of the Equal Pay Act, and would vitiate the very purpose for which the Act stands.” The “any factor other than sex” clause is limited to “legitimate, job-related factors, such as experience, education, and ability. The catch-all provision does not include business-related reasons . . . Essentially, the opportunity for cost-savings is not an acceptable reason for a pay differential.”
Ultimately, based upon the Court’s ruling prior salary is not to be considered “job related” and cannot be used to justify an employee’s wages in the 9th circuit’s jurisdiction, which includes California, Washington, Nevada, Arizona, Oregon, Alaska, Hawaii, Idaho, and Montana.
This news comes on the heels of recent legislation banning salary history questions during the hiring process in eight US states and Puerto Rico. Employers should check their local statutes and conduct internal audits on their processes to ensure they are staying compliant with applicable law.