April 10, 2018

In the Ninth Circuit, the Equal Pay Act’s Catchall Exception No Longer Catches Salary History

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Recent years have seen rising movements aimed towards closing the gender wage gap.  In fact, you may notice employees wearing red today for national #EqualPayDay.  On April 9, 2018, in Rizo v. Yovino, the Ninth Circuit added to the national discourse by expanding the Equal Pay Act’s protections in one key aspect – excluding salary history as a justification for wage disparities under the Act’s catchall exception.

The Equal Pay Act

The Equal Pay Act requires employers to pay men and women equal pay for equal work, with four exceptions.  Employers can justify wage differentials based on:  (1) merit, (2) seniority, (3) quantity or quality of work, or (4) the catchall exception – “any other factor other than sex.”   Federal circuits uniformly concluded that this catchall exception included employees’ salary history.  In 1982, the Ninth Circuit in Kouba v. Allstate Insurance Co., specifically held that past salary is a “factor other than sex.”

However, many things have changed since 1982.  National discourse on the gender wage gap has only gotten stronger with social media as a platform for discussion.  And recently, states have been progressively enacting their own pay equity legislation that offer more protection than the Equal Pay Act.  California’s Fair Pay Act, for example, is the broadest in the nation and prohibits wage disparities based on gender, race, and ethnicity.  Effective January 1, 2018, California also prohibits employers from asking applicants about salary history or, if voluntarily disclosed, using salary history to justify pay disparity.  Now, another change to add to this list is the Ninth Circuit’s view of this catchall exception – which now falls in line with California.

Rizo v. Yovino

 Aileen Rizo, a math consultant in Fresno County School District, sued the Superintendent Jim Yovino alleging that the County violated the Equal Pay Act by compensating new hires based on the salary they earned at their prior job.  Rizo filed suit after learning that a recently hired male colleague with less experience than her earned approximately $12,000 more than Rizo.  The County asserted that although Rizo was paid less than her male counterpart for the same work, the discrepancy was based on Rizo’s prior salary, which was a “factor other than sex.”

The issue on appeal was whether an employer could consider prior salary under the Equal Pay Act’s catchall exception when setting its employees’ salaries.  According to the Ninth Circuit en banc, no.  The Court made clear that “[p]rior salary alone or in combination with other factors cannot justify a wage differential” among gender.  The Court explained that “[t]o hold otherwise – to 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.

Rizo puts the Ninth Circuit at odds with other circuits and overturns three decades of Ninth Circuit precedent in Kouba.  We await to see if the Supreme Court agrees to resolve this split, and if other circuits follow along.  But for now, Ninth Circuit employers should start auditing their workforce and practices for gaps based on salary history.

Ferry Eden Lopez