Ninth Circuit Finds Employers Cannot Use an Employee’s Prior Pay to Defend Against Equal Pay Act Claims

March 13, 2020
Overview 
Employers cannot justify disparity in pay for employees of the opposite sex based on past earnings, an en banc panel of the Ninth Circuit ruled in Rizo v. Yovino, No. 16-15372, — F.3d — (Feb. 27, 2020).  The decision eliminates a defense to claims under the Equal Pay Act that allowed employers to avoid liability by relying on an employee’s prior salary history to justify paying male and female employees differently for the same work.
 
The Equal Pay Act 
The Equal Pay Act of 1963 (“EPA”) “enacted into law the principle of equal pay for equal work.”  Corning Glass Works v. Brennan, 417 U.S. 188, 205 (1974).  The EPA provides that employees of the opposite sex must be paid at an equal rate for work that “requires equal skill, effort, and responsibility” and is “performed under similar working conditions.”  29 U.S.C. § 206(d)(1).  The statute identifies four exceptions to the equal-pay mandate, where 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.”  Id. 
 
Case Background 
Plaintiff Aileen Rizo was hired as a math consultant by the Fresno County Office of Education in 2009.  In accordance with standard operating procedure, the County determined Rizo’s salary by starting with her prior salary, increasing it by 5%, and placing her at the corresponding step on the County’s pay schedule. 
 
When Rizo learned several years later that she was earning less than all of her male colleagues, she sued alleging, among other claims, a violation of the EPA.  The County argued that its policy was lawful because prior salary was a “factor other than sex” and therefore permitted under the EPA’s so-called “catch-all” fourth affirmative defense.  Although the district court denied the County’s motion for summary judgment, a three-judge panel of the Ninth Circuit reversed the district court decision and ruled in the County’s favor.  Thereafter, the Ninth Circuit voted to hear the case en banc, and in April 2018, the en banc panel issued an opinion holding that an employer could not justify a wage differential between male and female employees by relying on prior salary.  Rizo v. Yovino, 887 F.3d 453, 456 (2018).  The Supreme Court subsequently vacated this decision, however, because the author of the majority opinion, Judge Stephen Reinhardt, died eleven days before the en banc opinion issued.  Yovino v. Rizo, 139 S. Ct. 706, 710 (2019) (per curiam).
 
The Ninth Circuit Decision 
On remand from the Supreme Court, the Ninth Circuit en banc panel again rejected the County’s argument and ruled that the EPA’s catch-all affirmative defense “encompasses only job-related factors other than sex,” such as education, skills, or prior experience.  The Court further held that “[p]rior pay—pay received for a different job—is necessarily not” a job-related factor.  The Court noted that “[t]he express purpose of the Act was to eradicate the practice of paying women less simply because they are women.”  “Allowing employers to escape liability by relying on employees’ prior pay would defeat the purpose of the Act and perpetuate the very discrimination the EPA aims to eliminate.”
 
The Ninth Circuit’s decision stops short of holding that the EPA prevents employers from considering salary history for all purposes, noting that “it is not unusual for employers and prospective employees to discuss prior pay in the course of negotiating job offers.”  Nevertheless, the Court stated that “whatever factors an employer considers, if called upon to defend against a prima facie showing of sex-based wage discrimination, the employer must demonstrate that any wage differential was in fact justified by job-related factors other than sex.”  “Prior pay, alone or in combination with other factors, cannot serve as a defense.”
 
Although other circuit courts have limited the scope of the EPA’s catch-all defense, the Ninth Circuit is the first to hold that prior salary may never be used as a defense.  The decision also directly conflicts with the Seventh Circuit, which has held that prior wages are a “factor other than sex.”  See Wernsing v. Dep’t of Human Servs., 427 F.3d 466, 468 (7th Cir. 2005).  Given the circuit split, if the County ultimately appeals the decision, the scope of the EPA’s catch-all defense is ripe for review by the Supreme Court.
 
The Ninth Circuit’s decision also aligns with various state and local laws that prohibit employers from requesting prior salary information from job applicants and making compensation decisions based on such information.

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