April 10, 2018

Ninth Circuit: Under Equal Pay Act, Prior Salary History Cannot Justify Pay Disparity

In its April 9 ruling in Rizo v. Yovino, the Ninth Circuit issued a significant decision holding that employers cannot rely on workers’ past salaries to justify disparities between male and female employee wages under the Equal Pay Act (EPA). In doing so, the Ninth Circuit not only parted ways with its past precedent, but created a clear split with the holdings of other federal appellate courts. 

The case involved an employee who was hired to work as a consultant for a county. To determine her starting salary, the county followed a standard operating procedure that took her prior salary into consideration. The process created a pay disparity in which the employee’s starting salary was less than her male coworkers performing substantially equal work. The employee sued, alleging violations of the EPA. The county responded that its use of the employee’s prior salary was a reasonable factor other than sex, which explained the pay disparity.

The Ninth Circuit disagreed. According to the court, the EPA sets out a “simple structure” to achieve the goal of ending the “serious endemic problem of employment discrimination in private industry.” That “simple structure” provides that “[a] plaintiff must show that her employer has paid male and female employees different wages for substantially equal work,” the court wrote. However, if the employer can demonstrate that a statutory exception applies, it operates as an affirmative defense to the pay disparity. 

At issue in Rizo was the “catchall” exception for a “differential based on any other factor other than sex.” The Ninth Circuit determined that the “text, history, and purpose of the Equal Pay Act” proved that under the exception, an employer cannot “justify a wage differential between male and female employees by relying on prior salary.” The court held that “prior salary alone or in combination with other factors cannot justify a wage differential.” The court concluded that “‘any other factor other than sex’ is limited to legitimate, job-related factors such as a prospective employee’s experience, educational background, ability, or prior job performance.” 

The court did note that it was expressing a “general rule” that may not apply in all circumstances. For example, the court stated that it was not deciding “whether or under what circumstances, past salary may play a role in the course of an individualized salary negotiation.”

Even so, employers in the Ninth Circuit cannot rely on generic practices regarding prior salary to avoid EPA claims. And while it remains to be seen whether courts outside of the Ninth Circuit will adopt this standard, it also remains a best practice for employers to evaluate their pay practices carefully with reference to the EPA and other employment laws.

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