Salary History-Based Gender Pay Gap Case May Head to US Supreme Court

Salary History-Based Gender Pay Gap Case May Head to US Supreme Court

In April, the Ninth US Circuit Court of Appeals ruled in an en banc rehearing of a case decided by a three-judge panel last year that differences in past salaries don’t justify disparities in pay between male and female employees in the same role. The unanimous ruling, authored by the late Judge Stephen Reinhardt, concluded that even though the Fresno, California, school district’s pay structure was not discriminatory in intent, it perpetuated gender-based wage disparities in a manner “contrary to the text and history of the Equal Pay Act.”

Because pay gender disparities in pay may have arisen from sex discrimination, the court reasoned, a system that allows these gaps to persist throughout an employee’s career effectively functions to “perpetuate rather than eliminate the pervasive discrimination at which the Act was aimed.” The Ninth Circuit’s judgment is in keeping with a trend that has been building up over the past few years in which employers are feeling greater pressure to stop basing pay structures on salary history, due to the potential for perpetuating unfair pay gaps. Appeals courts have divided on the question, however, with the 10th and 11th Circuits also finding that salary history-based pay systems are not exempt from Equal Pay Act claims, while the Seventh and Eighth Circuits have disagreed.

A circuit court split is often a prelude to Supreme Court review of a legal question. The Fresno school district had planned to appeal the Ninth Circuit’s ruling to the highest court, but had suspended that process while it attempted to reach a settlement with the plaintiff, Aileen Rizo. Now, however, the settlement talks have broken down and the district is preparing to petition the Supreme Court for review next month, Erin Mulvaney reports at the National Law Journal. That doesn’t mean the court will take the case, Mulvaney notes, but “any petition would likely fuel friend-of-the-court briefs”:

The U.S. Equal Employment Opportunity Commission urged the Ninth Circuit to restrict the ability of employers to base new employees’ starting pay on their most recent compensation. “Males in teaching and other education-related jobs continue to out-earn their female counterparts,” the agency said in a brief. “A practice of basing starting pay for new employees solely on what they earned in their most recent prior job simply institutionalizes the gender pay gap that studies confirm still exists. …

Fresno’s lawyers argued the school district’s policy that determines salaries was “absolutely gender-neutral, objective and effective in attracting qualified applicants and complied with all applicable laws.”

Several judges said the majority’s ruling, expressed as a general rule, could pose challenging practical implications. Judge Margaret McKeown and Judge Mary Murguia said in a concurring opinion that an employee might choose voluntarily to provide prior salary “as a bargaining chip for higher wages.” McKeown wrote: “I am concerned about chilling such voluntary discussions. Indeed, the result may disadvantage rather than advantage women.”

In the meantime, as this case continues to shake out in federal courts, several states have enacted laws barring employers there from asking candidates about their salary histories or using this information to set pay, including California, Delaware, Oregon, Vermont, and most recently Connecticut. In May, a federal judge partially overturned a local ban in Philadelphia, finding that the city could not restrict employers from asking the question without infringing their First Amendment rights, but upheld its prohibition on using salary histories to determine compensation.