Equal Pay Update: Ninth Circuit Ruling re Salary History

The Ninth Circuit has recently ruled that salary history cannot be used to justify a wage gap between men and women. Specifically, in Rizo v. Yovino, Case No. 16-15372 (9th Cir. April 8, 2018), the Ninth Circuit held that a “factor other than sex” under the federal Equal Pay Act must be “job-related” and the court therefore rejected an employer’s use of pre-employment salary history as a reason to pay females less than males performing the same work.

Under the Equal Pay Act, differential payments between male and female employees doing equal work are prohibited unless the disparity is pursuant to (i) a seniority system, (ii) a merit system, (iii) a system that measures earnings by quantity or quality of production, or (iv) a differential based on any other factor other than sex. Over the years, many employers have argued that an applicant’s prior, pre-employment salary history falls under the fourth “catchall” exception as a “factor other than sex.” However, in Rizo v. Yovino, the court rejected this reasoning, finding that prior salary should not be considered a “factor other than sex.”

The facts of the case are that plaintiff Aileen Rizo was hired as a math consultant by the Fresno County Office of Education in 2009. At the time of her hire, Fresno County determined a new hire’s starting salary by taking the new hire’s prior salary, adding 5%, and then placing the new hire into Fresno County’s salary levels. In 2012, Rizo learned that her male colleagues were hired at higher salary steps, and she filed a complaint alleging violation of the Equal Pay Act and other sex discrimination related claims. Fresno County moved for summary judgment by arguing that Rizo’s prior salary was a permissible affirmative defense under the catch-all “factor other than sex” exception. The court denied summary judgment, noting that such a pay structure “will perpetuate a discriminatory wage disparity between men and women.” The district court then certified its denial for interlocutory appeal and subsequently a three-judge panel of the Ninth Circuit vacated the denial of summary judgment on the basis that prior salary alone could constitute a “factor other than sex” under prior its authority.

The Ninth Circuit reversed the three-judge panel, holding that allowing prior salary to justify wage differentials 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 court held that it could not construe the catchall exception as justifying setting employees’ starting salaries on the basis of their prior pay. However, the court held that it was expressing a general rule and not attempting to resolve its applications under all circumstances. For example, the court noted that it did not decide whether or under what circumstances past salary may play a role during individualized salary negotiations, and instead preferred “to reserve all questions relating to individualized negotiations for decisions in subsequent cases.”

Consistent with various recent state laws limiting the use of prior salary as part of an employer’s hiring and pay decisions, the Ninth Circuit’s holding emphasizes that the use of prior salary information to set current pay can be evidence of pay discrimination. As a result, employers should review their pay and hiring practices to ensure compliance with equal pay laws.

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