Appeals Court Says Prior Salary Doesn’t Justify Pay Differences

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Apr 9, 2018

Just in time for Equal Pay Day, a federal appeals court today ruled today that an employee’s salary history alone is insufficient to justify pay differences between male and female employees.

“Reliance on past wages simply perpetuates the past pervasive discrimination that the Equal Pay Act seeks to eradicate,” said an 11-judge panel of the 9th District Court of Appeals in San Francisco. “Therefore, we readily reach the conclusion that past salary may not be used as a factor in initial wage setting, alone or in conjunction with less invidious factors.”

Adopted in 1963, the Equal Pay Act requires employers to pay men and women the same “for equal work on jobs the performance of which requires equal skill, effort, and responsibility, and which are performed under similar working conditions.” It does provide 4 exceptions:

  1. “a seniority system;
  2. a merit system;
  3. a system which measures earnings by quantity or quality of production;
  4. a differential based on any other factor other than sex.

In the case at the heart of the decision, the Fresno (California) County Office of Education hired Aileen Rizo as a math consultant, paying at a level based on her prior salary as a teacher in Arizona. A few years later, she discovered her male colleagues were paid more. When she complained, the county cited its policy of paying at step levels consistent with the employee’s prior salary. Rizo sued claiming a violation of the Equal Pay Act. The county defended its pay policy pointing to the 4th exception, the so-called “catchall provision.” Because the pay scales applied equally to men and women, any difference in pay levels was not due to the employee’s sex.

The 9th Circuit’s decision, written by the late Stephen Reinhardt (he died last month), expressly rejected that reasoning. “It is inconceivable that Congress, in an Act the primary purpose of which was to eliminate long-existing ‘endemic’ sex-based wage disparities, would create an exception for basing new hires’ salaries on those very disparities — disparities that Congress declared are not only related to sex but caused by sex,” Reinhardt wrote.

“We conclude, unhesitatingly, 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.”

Advocacy groups have long argued that one reason for the pay differential between men and women is pay history. Because women historically were paid less than men, using their salary history simply perpetuates the inequity. To call attention to the issue of women’s pay, several organizations led by the National Committee On Pay Equity in 1996 declared an Equal Pay Day. It represents how far into each successive year women must work to catch up to what men made working the previous year. This year, the day is April 10.

Today’s decision, which only applies to nine states in the West, overruled a 1982 case allowing employers to base a pay differential on an employee’s prior salary history. “Prior salary, whether considered alone or with other factors, is not job related and thus does not fall within an exception to the (Equal Pay) Act that allows employers to pay disparate wages,” said the court declaring that because its prior decision in Kouba v. Allstate Ins. Co “is inconsistent with the rule that we have announced in this opinion, it must be overruled.”

There were three concurring opinions, which agreeing with the outcome, expressed concern over its reach. Judge Margaret McKeown, joined by Judge Mary Murguia, wrote, “The majority goes too far in holding that any consideration of prior pay is “impermissible” under the Equal Pay Act, even when it is assessed with other job-related factors such as experience, education, past performance and training.”

An attorney for Fresno County said the county intends to appeal the decision to the U.S. Supreme Court.