Prior Salary Cannot Justify Wage Differentials Between Men And Women Under Federal Equal Pay

By Swerdlow Florence Sanchez Swerdlow & Wimmer

April 20, 2018

Employers cannot rely on prior salary history to justify differences in pay between men and women performing substantially similar work under the federal Equal Pay Act, according to the Ninth Circuit Court of Appeals. In Rizo v. Yovino, the court concluded that “[r]eliance on past wages simply perpetuates the past pervasive discrimination that the Equal Pay Act seeks to eradicate,” and held that past salary may not be used as a factor in initial wage setting, either alone or in conjunction with other factors.

The federal Equal Pay Act prohibits paying male and female employees different wages for substantially equal work, with four exceptions, one of which is a differential based on “any other factor other than sex.” 29 U.S.C. § 206(d)(1).

In Rizo, the plaintiff – Aileen Rizo – was hired as a math consultant by the Fresno County Office of Education. Her salary was determined in accordance with the County’s Standard Operating Procedure, which dictated that a new hire’s salary was to be determined by taking the hired individual’s prior salary, adding 5%, and placing the new employee on one of the County’s 10 stepped salary levels. After Rizo learned that her male colleagues had been hired at higher salary steps, she sued claiming violation of the Equal Pay Act. The County argued that her prior salary was a permissible affirmative defense to her lower salary under the “factor other than sex” exception.

The Ninth Circuit disagreed with the County and concluded that prior salary, whether alone or with other factors, is not job related and does not fall within the catch-all exception. The court limited the “any other factor other than sex” exception to legitimate, job-related factors, such as prospective employee’s experience, educational background, ability, or prior job performance. Holding otherwise, according to the court, would perpetuate, not eliminate, gender discrimination in pay.

Although this case still may be appealed to the United States Supreme Court, employers should, in concert with their counsel, review their pay practices to determine whether any wage differentials exist between similarly situated men and women and, if so, whether such differentials are based on lawful factors. Employers will have a stronger affirmative defense to any claims under the Equal Pay Act if gender-related pay differences are based on job-related factors, such as experience, educational background, and job performance. In addition, employers would be well advised to create pay scales or pay grades for all positions, consistent with market demands and a multitude of non-gender-based factors. We can assist our clients in developing these pay scales to comply with federal and state laws.

Furthermore, California employers should ensure that they no longer inquire about previous salary history and benefits on employment applications or during the hiring process. As we’ve previously reported, effective January 1, 2018, California joined states such as Delaware, Massachusetts, New York, and Oregon, and municipalities such as New York City, Philadelphia, and San Francisco, in restricting employers from asking about a job applicant’s salary history.

Contact your SFSS&W attorney if you have any questions about the federal Equal Pay Act, about complying with California law requiring salary history inquiries, or need assistance proactively developing salary bases for your company.