US Appeals Court Confirms Salary History is Not a Permitted ‘Factor Other Than Sex’ under Equal Pay Act

Under the Equal Pay Act, all employers must pay equal wages to women and men in the same establishment for performing substantially equal work. The law covers jobs that require substantially equal skill, effort and responsibility and are performed under similar working conditions. The law covers all forms of pay, including salary, overtime pay, bonuses, stock options, profit sharing and bonus plans, life insurance, vacation and holiday pay, cleaning or gasoline allowances, hotel accommodations, reimbursement for travel expenses and benefits. Unequal compensation can be justified only if the employer shows that the pay differential is attributable to a fair seniority, merit or incentive system, or a factor other than sex. On April 9, 2018, in interpreting the Equal Pay Act, the Ninth Circuit US appeals court ruled that women cannot be paid less than men based on their previous salary. While many states and cities have recently have passed laws forbidding employers from asking about a candidate’s prior wages, the decision in Rizo v. Yovino establishes that using a woman’s previous salary as an excuse for paying her less than a man is a violation of the 1963 law abolishing discrimination in pay. The court stated: "We now hold that prior salary alone or in combination with other factors cannot justify a wage differential. To 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. ...We conclude, unhesitatingly, that “any other factor other than sex” is limited to legitimate, job-related factors such as a prospective employee’s experience, educational background, ability, or prior job performance. It is inconceivable that Congress, in an Act the primary purpose of which was to eliminate long-existing “endemic” sex-based wage disparities, would create an exception for basing new hires’ salaries on these very disparities — disparities that Congress declared are not only related to sex but caused by sex. To accept the County’s argument would be to perpetuate rather than eliminate the pervasive discrimination at which the Act was aimed." Although the case arose in an initial wage setting, the opinion suggests that the logic will be applied with equal force to promotions and job transfers. This ruling follows a lawsuit by Aileen Rizo, a school employee, who learned in 2012, while having lunch with her colleagues, that male counterparts hired after her were making more money. Rizo was hired as a math consultant in 2009 and paid pursuant to a standard policy that added 5 percent to her previous pay. In an interview regarding the case, Rizo stated: "I couldn't educate myself out of being paid less, I couldn't get more experience or be in the job market longer to break that cycle, because low wages will follow you wherever you go as long as someone keeps asking you how much you were paid." Lest employers consider banning salary conversations between employees, you should be aware that the National Labor Relations Act protects non-supervisory employees who are covered by the Act from employer retaliation when they discuss their wages or working conditions with their colleagues as part of a concerted activity to improve them. Additionally, these National Labor Relations Act rights are not waivable in employment nondisclosure agreements. If you would like to consult Setliff Law regarding your hiring, salary negotiation, and employment practices please contact us at any time 804-377-1261.