May 3, 2018, Trial News | The American Association For Justice

May 3, 2018, Trial News

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Employers cannot use salary history to justify gender wage gap, Ninth Circuit holds

Diane M. Zhang

photo of a man and woman figurine, each standing on a tower of quarters, the man is standing on a larger tower of quarters

The Ninth Circuit has ruled en banc that an employer cannot justify a wage difference between male and female employees by relying on the employees’ prior salary history, either alone or in combination with several other factors. Examining the “text, history, and purpose” of the Equal Pay Act of 1963, the court ruled that the answer to whether prior salary could ever be considered in setting present salary—a previously unresolved question of law—was a “clear” no.
 

The Ninth Circuit has ruled en banc that an employer cannot justify a wage difference between male and female employees by relying on the employees’ salary history, either alone or in combination with several other factors. (Rizo v. Yovino, No. 1:14-cv-00423-MJS (9th Cir. Apr. 9, 2018).)  Examining the “text, history, and purpose” of the Equal Pay Act of 1963, the court ruled that the answer to whether prior salary could ever be considered in setting present salary—a previously unresolved question of law—was a “clear” no.

Aileen Rizo was a math consultant employed by the Fresno County Office of Education. In a previous position, she earned $50,630 for the days worked and received an annual educational stipend of $1,200. Upon joining the Fresno County Office of Education, Rizo’s salary was determined by an equation that did not factor in prior experience but instead relied on the employee’s prior salary.

In 2012, Rizo learned that male colleagues hired after her earned more than she did. She filed a complaint about the disparity with her employer, who responded that salaries had been set in a standard manner that took into account salary history.

Rizo sued the superintendent of the Fresno County Office of Education in 2014, claiming a violation of the Equal Pay Act, sex discrimination under Title VII of the Civil Rights Act of 1964, and sex discrimination and failure to prevent discrimination under California law. The county moved for summary judgment, arguing that using Rizo’s prior salary to justify her lower salary was permissible because it was not based on her sex—one of the catch-all exceptions under the Equal Pay Act. But the district court denied the  motion, explaining that a pay structure based solely on prior wages is “inherently fraught with the risk . . . that it will perpetuate a discriminatory wage disparity between men and women.”

A three-judge panel granted the county’s petition for permission to file an interlocutory appeal. The panel vacated the denial of summary judgment and looked to precedent in Kouba v. Allstate Ins. Co. (691 F.2d 873 (9th. Cir. 1982)), which held that the Equal Pay Act did not impose a “strict prohibition against the use of prior salary.” The three-judge panel concluded that the employer must show that using prior salary effectuated some business policy and that the employer used the prior salary reasonably in light of the employer’s stated purpose. The district court, the panel concluded, should examine the county’s proffered reason.

In rehearing the petition en banc to clarify the law, the Ninth Circuit first examined the Equal Pay Act, noting that it created “strict liability” for employers: Once a plaintiff demonstrates a wage disparity, she is not required to prove discriminatory intent. Here, however, the county did not dispute that Rizo established a pay disparity, asserting instead that a catch-all exception under the Equal Pay Act—specifically, “any other factor other than sex”—permits an employee’s prior salary to be a factor in salary determination.

In determining what this exception meant, the court “unhesitatingly” concluded that it is limited to “legitimate, job-related factors such as a prospective employee’s experience, educational background, ability, or prior job experience,” calling it “inconceivable” that Congress, in enacting the statute, would create an exception for “basing new hires’ salaries on those very disparities.” To accept the county’s argument, the court noted, would perpetuate those gender disparities.

The court also concluded that when the statute’s exception is read “in light of its surrounding context and legislative history,” a legitimate “factor other than sex” would have to be related to the job itself and that gender disparity in pay is not justified if the work is the same. Prior salary, the court explained, is not a legitimate measure of work experience because it is not related to ability or performance.

The Ninth Circuit also held that Kouba was inconsistent with its current ruling and must be overruled. First, a factor other than sex must be one that is job related—regardless of the employer’s proffered business reason for relying on prior salary—and second, because prior salary history is not related to the job, the current ruling rendered it impermissible to consider it in setting an employee’s salary. “This is true,” the court held, “whether prior salary is the sole factor or one of several factors considered in establishing employees’ wages.”

San Francisco attorney Lori Andrus, who handles gender wage discrimination cases, said, “This case represents a victory for common sense. For decades, defendants have tried to rationalize unequal treatment of working women by any means necessary. Pointing to prior salary was just one more attempt by employers to wedge a biased parameter into the Equal Pay Act’s ‘any factor other than sex’ catch-all defense. The Ninth Circuit, sitting en banc, saw the absurdity of that argument and thankfully put a stop to it. With this decision, plaintiff attorneys should take another look at the federal Equal Pay Act, a seriously underutilized statute.”