Salary History is OK for Setting Pay, Court Rules

Decision contradicts other rulings; Supreme Court may have to resolve split among courts

By Allen Smith, J.D. May 1, 2017
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A 9th U.S. Circuit Court of Appeals decision contradicts other appeals court rulings by holding that salary history alone may be used in setting pay--an appellate split that the Supreme Court may have to resolve. 

The plaintiff in this case is Aileen Rizo, a math consultant for Fresno County, Calif., schools. Over lunch with male colleagues Rizo, learned that she was paid less than all of them, though they had the same job. She sued, claiming a violation of the federal Equal Pay Act.

A district court determined that the county's reason for her lower pay—prior salary—was "so inherently fraught with the risk … that it will perpetuate a discriminatory wage disparity between men and women that cannot stand, even if motivated by a legitimate nondiscriminatory business purpose."

But the 9th U.S. Circuit Court of Appeals reversed on April 27 (Rizo v. Yovino, No. 16-15372), concluding that, under the Equal Pay Act, prior salary can be a factor other than sex if it supports a business policy and the employer uses the factor reasonably in light of its stated purposes and practices.

The decision on the applicability of the federal Equal Pay Act does not affect state laws, such as one in Massachusetts that takes effect in 2018, that prohibit employers from asking about salary history in job interviews.

Fresno County Claims Business Reasons for Policy

Fresno County claimed four business reasons for relying exclusively on prior salary:

  • The policy is objective.
  • The policy encourages candidates to leave their current jobs for positions with the county because the county always pays new employees 5 percent more than their old salary.
  • The policy prevents favoritism and ensures consistency.
  • The policy is a judicious use of taxpayer dollars.

The appeals court sent the case back to the district court to examine whether Fresno County's reliance on prior salary in setting pay effectuated some business policy and used prior salary reasonably. The 9th Circuit rejected the district court's determination that salary history cannot be the only factor for setting pay. But the 10th and 11th Circuits have reached the opposite conclusion (in Angove v. Williams-Sonoma Inc., 70 F. App'x 500, 508 (10th Cir. 2003), and Irby v. Bittick, 44 F.3d 949, 954 (11th Cir. 1995), respectively).

(9th U.S. Circuit Court of Appeals Opinions)

Plaintiff's Lawyer Notes the Split in Authority

Rizo's attorney hasn't decided his next move but did note that the case may go to the U.S. Supreme Court since there now is a split at the appellate court level. "The logic of the decision is hard to accept. You're OK'ing a system that perpetuates the inequity in compensation for women."

(The Associated Press)

[SHRM members-only platform: SHRM Connect]

State Laws May Have Broader Protections

Already some state laws provide broader coverage than the Equal Pay Act. Massachusetts, for example, has a prohibition on inquiring about salary histories. As of 2018, employers in the Bay State may not ask about salary history before offering a job to an applicant. In addition, employers won't be able to contact an applicant's former company to confirm the wage amount until after an offer is made. Even then, employers will only be able to verify past wage amounts if they have written permission from the applicant.

(SHRM Online)

California's Fair Pay Act

California has the Fair Pay Act, which requires employers to explain differences between male and female employees' pay. It tasks employers with proving that any disparities in pay between men and women doing "substantially similar" work are based on a limited number of acceptable factors, including seniority, education and "quantity or quality of production" of goods. Rizo's claim arose before the enactment of the Fair Pay Act; she therefore did not sue under it.
(SHRM Online)

 

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