Ninth Circuit Confirms (Again): Employers Cannot Rely on Prior Pay to Justify Gender Pay Disparities

In April 2018, the Ninth Circuit held that employers cannot consider pre-employment salary history, even in combination with other factors, to justify gender pay disparities. See Rizo v. Yovino, 887 F.3d 453 (9th Cir. 2018) (en banc). Why is the Ninth Circuit deciding this case again? The author of the majority opinion, Judge Stephen Reinhardt, unfortunately died before the previous opinion was issued, and since his vote made a difference to the outcome of the case, the Supreme Court ordered the decision vacated. See Yovino v. Rizo, 139 S. Ct. 706 (2019).

In a new opinion, Rizo v. Yovino, No. 16-15372 (9th Cir. Feb 27, 2020) (en banc), the Ninth Circuit reaffirmed its original en banc holding. The Equal Pay Act (EPA) of 1963 mandates that all employees be paid the same for “work on jobs the performance of which requires equal skill, effort, and responsibility, and which are performed under similar working conditions, except where such payment is made pursuant to (i) a seniority system; (ii) a merit system; (iii) a system which measures earnings by quantity or quality of production; or (iv) a differential based on any other factor other than sex.” 29 U.S.C. § 206(d)(1). For many years, employers have argued that an employee’s pre-employment salary history fell under the “any other factor other than sex” exception. This decision bars that argument

In this case, a female math teacher, Aileen Rizo, discovered she was being paid approximately $17,000 less than a male colleague three years her junior who did not have her level of education. She then discovered she was being paid less than all of her male colleagues. The defendant did not deny that Rizo was being paid less than all of her male counterparts. It instead claimed that Rizo was not subject to pay discrimination because its employees’ salaries were based on prior pay, which it argued was covered by the “any other factor other than sex” exception.

The court interpreted “any other factor other than sex” exception to be “limited to job-related factors.” In the majority’s view, “[t]he equal-pay-for-equal-work mandate would mean little if employers were free to justify paying an employee of one sex less than an employee of the opposite sex for reasons unrelated to their jobs.” The court then reasoned that prior pay cannot qualify as a job-related factor because “setting wages based on prior pay risks perpetuating the history of sex-based wage discrimination.”

The majority does not declare that employees and employers can never discuss prior pay: “[I]t is not unusual for employers and prospective employees to discuss prior pay in the course of negotiating job offers, and the EPA does not prohibit this practice. Certainly our opinion does not prohibit this practice.” In other words, though the EPA does not itself forbid discussions of prior pay, if an employer is accused of an EPA violation, it is its burden to show that any pay discrepancy was based only on job-related factors.

Practical Implications

Do not consider an employee’s pre-employment pay when setting their new pay. California employers are reminded that California’s Equal Pay Act prohibits employers from relying on a job applicant’s salary history in setting the applicant’s starting wage/salary or eliciting salary history from job applicants. You can learn more about California’s salary history ban here. For more information on what is trending on this topic nationwide please see our recent article, “You Can’t Ask This: The Spread of Salary History Bans and What it Means for Employers.”