Salary Histories Can’t Justify Gender-Based Pay Disparities, Ninth Circuit Rules

Salary Histories Can’t Justify Gender-Based Pay Disparities, Ninth Circuit Rules

Differences in past salaries are insufficient to justify disparities in pay between male and female employees in the same role, the Ninth US Circuit Court of Appeals ruled on Monday. In an en banc rehearing of a case decided by a three-judge panel nearly a year ago, the court’s 11 judges unanimously ruled in favor of Aileen Rizo, a California school employee who learned in 2012 that her male counterparts were making more than she was and filed a discrimination suit under the Equal Pay Act.

The panel last year, citing a 1982 ruling by the court that said employers could use salary history information as long as they applied it reasonably, had overturned a 2015 decision by US Magistrate Judge Michael Seng, which held that the Fresno, California, school district’s pay structure perpetuates gender-based wage disparities. Monday’s opinion, authored by the late judge Stephen Reinhardt before his death last month, reaffirmed Seng’s ruling, concluding that ” 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”:

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 those 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.

Reinhardt’s opinion will cheer critics of salary histories, who argue that using this information to set pay enables the persistence of unjustifiable gender-based pay gaps throughout an employee’s career.

The circuit courts remain split on the question of their validity, Courthouse News adds, with the 10th and 11th Circuits holding that pay structures based on salary history are not exempt from Equal Pay Act claims, while the Seventh and Eighth Circuits have held the opposite. The presence of a circuit court split is often a prelude to Supreme Court review, and the school district says it intends to appeal the ruling to the highest court.

Nonetheless, Monday’s ruling is indicative of an unmistakeable (and likely irreversible) trend in which employers are feeling more pressure to stop basing pay structures on salary history in the interest of equity and transparency. Employers would do well to get ahead of this trend and prepare for a world where this practice is no longer acceptable, employment attorneys tell SHRM’s Lisa Nagele-Piazza:

“Employers who have traditionally used prior salary as a factor, even if it’s not the sole factor, in setting compensation may now have risk under the Equal Pay Act [EPA] and may not be able to justify a gender pay disparity,” said Megan Winter, an attorney with Fisher Phillips in San Diego. …

Businesses that rely on job applicants’ past salary need to review and move away from such practices, Winter said. “Many companies have put conducting a pay audit somewhere towards the end of their to-do list, but there is now no time to waste.”