Court Rules Prior Salary Is Not a Defense Against Equal Pay

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Following the untimely demise only weeks ago of the judge many considered the “liberal lion” of the court, on April 9, 2018, the U.S. Court of Appeals for the Ninth Circuit filed (what is likely) the last opinion authored by Judge Stephen Reinhardt.  The matter of Rizo v. Yovino concerns Aileen Rizo, a female employee of the Fresno County Office of Education who, on hire, was placed on the salary schedule based on her salary at her prior position with a different employer.  Rizo subsequently learned that male colleagues performing the same work were placed into higher steps on the salary schedule due to their higher salaries on hire.  At issue in the case was solely whether a prior wage disparity is a “factor other than sex” that may be considered in support of an affirmative defense on a claim brought under the Equal Pay Act.

As a reminder, the Equal Pay Act (EPA) was signed into law by John F. Kennedy in 1963 with the objective of abolishing wage disparity based on sex.  Despite its clear prohibition against discrimination based on gender for work of “equal skill, effort, and responsibility,” employers have successfully defended against claims brought under the EPA by asserting one of the stated statutory exceptions.  Specifically, that the pay differential is made pursuant to “a seniority system, merit system, a system which measures earnings by quantity or quality of production, or…based on any other factor other than sex.”

In reaching its decision, the Ninth Circuit concluded unequivocally that prior salary history may not be one of those factors, as it is not a “legitimate, job-related factor” and may be reflective of past sexual discrimination.  As offered by the Court, examples of legitimate, job-related factors that would satisfy the fourth catchall statutory exception include experience, educational background, training, ability, and prior job performance.  Writing for the majority, Judge Reinhardt explained that including a prior wage disparity would permit employers to capitalize on “the persistence of the wage gap and perpetuate that gap ad infinitum.”  As such, the lower court’s denial of summary judgment was affirmed and the case remanded for further proceedings.

What this means moving forward is that all employers subject to the Fair Labor Standards Act and within the jurisdiction of the Ninth Circuit should evaluate any wage differentials among their employees of different sexes and consider whether those differentials are supported by legitimate, job-related factors.  Although by all accounts an appeal to the U.S. Supreme Court is likely, it is our recommendation that employees consider conducting an audit of wages in anticipation of local legislation incorporating the Court’s reasoning. Indeed, many states, including Washington and California, have recently adopted their own laws prohibiting wage disparities not supported by legitimate, job-related factors and/or prohibiting inquiry into prior compensation. The lawyers in the labor and employment group at Helsell Fetterman are available to assist employers with reviewing wage differentials or otherwise reviewing for compliance with state and federal Equal Pay laws.

This decision overturns the Ninth Circuit’s contrary holding last year, which was reached by a three-judge panel; it also overturns the Court’s prior holding in Kouba v. Allstate Ins. Co., 691 F.3d 873 (9th Cir. 1982).

About the Authors

Onik'a Gilliam-Cathcart

Ms. Gilliam-Cathcart’s practice primarily focuses on conducting investigations concerning claims of discrimination and retaliation, and counseling public and private organizations on a wide range of civil matters with an emphasis on employment-based claims. She also regularly trains and presents to employers on civil rights compliance and employment best practices.

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