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Employers Cannot Consider Prior Salary History under the Federal Equal Pay Act

06/06/18

Author: ADP Admin/Wednesday, June 6, 2018/Categories: State Compliance Update, Alaska, Arizona, California, Hawaii, Idaho, Montana , Nevada , Oregon , Washington

On April 9, 2018, the U.S. Court of Appeals for the Ninth Circuit held in Rizo v. Yovino that prior salary alone—or in combination with other factors—cannot justify a wage differential between male and female employees under the Equal Pay Act. No. 16-15372 (Apr. 9, 2018). This Rizo decision overturns a 2017 Ninth Circuit decision, which held that prior salary was a permissible “factor other than sex” under the Equal Pay Act. The Rizo decision is now the federal law across the Ninth Circuit jurisdiction - Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington.

Background:
The Fresno County Office of Education paid the plaintiff, Aileen Rizo, less than comparable male employees for the same work. Additionally, the County set starting pay based on a pay scale that took employees’ prior salary into account. Rizo sued for violation of the Equal Pay Act, among other claims. The County defended the Equal Pay Act claim on the basis of its fourth “catch-all” affirmative defense, which states that wage differentials are permissible if “based on any factor other than sex.”

The Ninth Circuit held that the “factor other than sex” affirmative defense is limited to “job-related factors” and that prior salary is not “a legitimate measure of work experience, ability, performance, or any other job-related quality.” The Court explained:
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. 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 these very disparities — disparities that Congress declared are not only related to sex but caused by sex. To accept the County’s argument would be to perpetuate rather than eliminate the pervasive discrimination at which the Act was aimed.

Although the case arose in an initial wage setting, the opinion suggests that the logic applies with equal force to promotions and job transfers. The Court did not address whether past salary may legitimately play a role in the course of individualized salary negotiations. It stated, “We prefer to reserve all questions relating to individualized negotiations for decision in subsequent cases.”

Coverage: Employers with employees in Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington.

Effective: April 9, 2018.

Action Required: You should review and, if necessary, revise your pay practices and policies to be consistent with both the Rizo decision and applicable state pay equity laws. Revisions may include modification to employment applications, interview protocols, and verification policies to exclude inquiries that relate to a job applicant’s salary history. You may also want to consider working with legal counsel to complete an equal pay analysis. Please note that the most recent version of our model employment application (available on FormSource / Forms Library) does not include questions seeking salary history.

As always, please be sure to contact your HR Business Partner if you have any questions.

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Tags: Compliance Corner06/06/18State Update

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