Ninth Circuit: Prior Salary History may be used to Justify Wage Differentials Between Men and Women
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APPLIES TO All Employers with AK, AZ, CA, GU, HI, |
EFFECTIVE April 27, 2017 |
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Last week, the Ninth Circuit ruled on Rizo v. Yovino, a wage inequality claim brought under the federal Equal Pay Act. In reviewing this case, the Ninth Circuit affirmed a previous case, Kouba v. Allstate Insurance Co., and confirmed that prior salary history may be considered a “factor other than sex” for the purpose of justifying a wage differential.
In Rizo, a female school teacher sued Fresno County after discovering she was paid less than comparable male employees for performing the same work. The County employs a tiered salary schedule to determine the starting compensation rate of certain employees. The County thus argued that, although Rizo was paid less than her male co-workers, her salary had been determined based upon the school district’s salary schedule.
The Ninth Circuit stated that, based on Kouba, prior salary history qualifies as a “factor other than sex” within the meaning of the federal Equal Pay Act. However, the circuit court highlighted that an employer must still demonstrate that the use of such salary history information is reasonably applied and effectuates business policy to use this justification. The circuit court remanded Rizo to the district court to evaluate if the County’s salary schedule and its business policies for using the schedule are reasonably applied.
The circuit court’s finding in Rizo is important for employers making compensation decisions—except for employers with California employees. Rizo was filed before the California Fair Pay Act went into effect. This decision does not address the California Fair Pay Act, which has more stringent requirements for wage equity than the federal Equal Pay Act. In particular, the Wage Equality Act of 2016 further amended the California fair pay provisions to specifically prohibit compensation decisions based on prior salary history alone.
Action Items
- Review compensation structuring policies and procedures for compliance with both federal and state requirements.
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Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser.
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