Supreme Court Vacates Pay Equity Case

Allen Smith, J.D. By Allen Smith, J.D. February 25, 2019
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Supreme Court Vacates Pay Equity Case

​A court decision prohibiting employers from paying women less because of their compensation history—mirrored in several state laws—has been overturned on a technicality.

The Supreme Court vacated Rizo v. Yovino, the 9th U.S. Circuit Court of Appeals' ruling that a person's previous compensation may not be used to justify gender pay disparity. In its Feb. 25 decision, the Supreme Court did not rule on the merits of the case, but vacated the decision because the circuit court counted the vote of a judge who agreed with and wrote the 9th Circuit's ruling—but died before the appeals court's final decision was issued.

Without that judge's vote, the 9th Circuit did not have a majority of judges to reach its holding.  "Federal judges are appointed for life, not for eternity," the Supreme Court stated.

The high court sent the case back to the 9th Circuit for further proceedings and left employers wondering to what extent they can rely on previous salaries as a defense for gender pay differences. We've gathered articles on pay equity from SHRM Online and other trusted media outlets.

Trend-Setting Decision

The federal Equal Pay Act (EPA) prohibits businesses from paying employees of one gender less than the other for equal work, but there are exceptions for wages determined by a merit or seniority system, a system that bases pay on the quantity or quality of work or "a differential based on any other factor than sex." This last catch-all category was the subject of the lawsuit because it's unclear if a job candidate's salary history is a permissible factor other than sex. The 9th Circuit ruled that the catch-all exception for factors other than sex is limited to legitimate job-related considerations, such as experience, education and prior work performance. Past compensation alone—or in combination with other factors—isn't a permissible consideration under the law, the court held. The decision is part of a larger trend in which lawmakers and courts are starting to reject the validity of prior salary or salary history information in setting the starting pay for job applicants, said Liz Washko, an attorney with Ogletree Deakins in Nashville, Tenn.

(SHRM Online)

Appellate Court Split

The 9th Circuit decision was the most liberal interpretation of the EPA among appeals courts. It was in direct contrast with a decision by the 7th Circuit that allows prior salary to be used as a defense to an EPA claim.

(Forbes)

States Ban Pay History Inquiries

Six states have pay equity laws prohibiting employers from asking applicants about salary history. California, Connecticut, Delaware, Massachusetts, Oregon and Vermont have such bans. "Income inequity is perpetuated by the practice of asking for salary history before an offer is made, which can disproportionately assure that women are underpaid at their first job and continue to be underpaid throughout their careers, creating a cycle of poverty," said Connecticut Gov. Dannel P. Malloy.

(SHRM Online)

SHRM Policy Statement

The Society for Human Resource Management (SHRM) "vigorously supports equal pay for equal work, with allowable pay differences based on factors not prohibited by law, and believes that any improper pay disparities should be promptly addressed," reads SHRM's public policy issue statement on compensation equity, released in 2018.

(SHRM

[SHRM members-only toolkit: Managing Pay Equity]

Improve Employee Databases to Ensure Pay Equity

Legal experts cited the 9th Circuit decision in Rizo and state bans on pay history inquiries as an impetus to capture work history, a legitimate reason to justify pay disparities between men and women, in employee databases. Most databases fail to include employees' experience prior to joining the company, which leaves company leaders at a loss when they are challenged to explain pay differences. One way to capture this information is to merge the data maintained in applicant databases, which includes work history, with main HR databases when applicants are hired.

(HR Magazine)

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