The Ninth Circuit Court of Appeals ruled the week of April 9, 2018, that an employer cannot justify a pay difference between male and female employees performing equal work based on prior salary. Rizo v. Yovino. (2018). This is a significant decision that could increase potential liability for Equal Pay Act (EPA) claims for employers with workers in states covered by the Ninth Circuit and provides guidance for the Tenth Circuit, which includes Wyoming.
Equal Pay Act Requirements
The EPA was enacted in 1963, amending the Fair Labor Standards Act, to prohibit wage disparities based on gender. It requires that men and women be paid equal pay for equal work regardless of gender. Specifically, the law provides that no employer shall discriminate on the basis of gender in paying wages for equal work on jobs the performance of which requires equal skill, effort, and responsibility, and which are performed under similar working conditions. Exceptions are permitted when wages are made pursuant to a seniority system, a merit system, a system measuring earnings by quantity or quality of production, or a differential based on any other factor other than gender.
Employer’s Pay Policy Added Five Percent to New Hires’ Prior Salary
In the Rizo case, Aileen Rizo was hired as a math consultant by the Fresno County Office of Education. Her salary was set according to the county’s Standard Operating Procedure. In that procedure, a new hire would be paid five percent over his or her prior salary, and placed on a corresponding step of the County’s ten-step salary schedule. Based on Rizo’s prior salary in Arizona, she was placed at step 1 of level 1 on the County’s hiring schedule.
A few years into her employment, Rizo was having lunch with other co-workers and learned that her male counterparts had been subsequently hired as math consultants at higher salary steps. Rizo filed a pay disparity complaint with the County. The County replied that her pay was set in accordance with its Standard Operating Procedure. Rizo filed a federal lawsuit alleging a violation of the EPA, sex discrimination under Title VII, and related state law claims.
Prior Pay Not A “Factor Other Than Sex”
The County did not dispute that it paid Rizo less than comparable male employees for the same work. Instead, it argued that considering each employee’s prior salary to set wages was a permissible “factor other than sex,” so any resulting wage differential was not in violation of the EPA.
The Ninth Circuit ruled that an employer was not permitted to consider an employee’s prior salary, either by itself or in combination with other factors, when establishing the employee’s wages. The Court specifically stated that “prior salary alone or in combination with other factors cannot justify a wage differential” because prior salary history does not constitute a “factor other than sex” under the EPA’s statutory “catchall” exception. The Court wrote that prior salary is not a legitimate measure of work experience, ability, performance, or any other job-related quality, and that employers must look directly to those underlying factors rather than prior salary when justifying a wage differential between male and female employees doing equal work. Writing for the majority, Judge Reinhardt stated, “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.”