Ninth Circuit Court of Appeals Finds Use of Salary History To “Justify” Unequal Pay Rates Violates Federal Pay Discrimination Law (US)
On April 9, 2018, the U.S. Court of Appeals for the Ninth Circuit issued an en banc ruling in Aileen Rizo v. Jim Yovino, case number 16-15372, holding that employers cannot justify a wage differential between men and women by relying on the employees’ respective wage histories alone. The plaintiff, a female consultant, learned that her employer, Fresno County, California, hired male colleagues at a significantly higher rate of pay for similar work. The County admitted that plaintiff’s male colleagues earned more than she did, but argued the wage differential was a result of their higher prior salaries at the time they were hired.
The 1963 federal Equal Pay Act (EPA) prohibits paying men and women differently for the same or substantially similar work, with four limited exceptions, i.e., where the different rate of pay is based on seniority, merit, the quantity or quality of the employee’s work, or “any other factor other than sex.” The County argued that the employees’ respective wage histories fell in this final catch-all exception. The Ninth Circuit disagreed, ruling 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.” Rather than permitting a broad reading of the catchall provision, the Court stated that the “any-other-factor-other-than-sex” defense should be limited to legitimate, job-related factors such as “a prospective employee’s experience, educational background, ability, or prior job performance.”
The Ninth Circuit has now joined the Second, Sixth, Tenth, and Eleventh Circuits, which all have interpreted the “any-other-factor-other-than-sex” exception in a similar manner. The Seventh and Eighth Circuits have refused to issue such broad pronouncements on the meaning of the catch-all exception, which may result in the Supreme Court resolving the Circuit split.
The Rizo decision adds to the growing concern about the use of salary history in determining employability generally and new hires’ starting salaries in particular. A number of states and cities (including California) have banned inquiries about salary history on applications and during the interview process, and now nearly half the federal Circuit Courts caution that use of salary history can perpetuate sex-based pay discrimination in violation of the EPA. Employers are urged to reconsider the use of salary inquiries in the hiring process and instead are encouraged to make objective determinations of the rate of pay to be offered to employees hired for particular roles, irrespective of the candidates’ salary history.