Ninth Circuit: Prior Salary Alone Cannot Justify Wage Differential under Equal Pay Act

After hearing argument en banc late last year to “clarify the law,” the Ninth Circuit Court of Appeals issued a decision on April 9, 2018, holding that prior salary alone or in combination with other factors cannot justify wage differential under the Equal Pay Act.

The opinion opened by explaining that “[t]he Equal Pay Act stands for a principle as simple as it is just: men and women should receive equal pay for equal work regardless of sex. The question before us is also simple: can an employer justify a wage differential between male and female employees by relying on prior salary? Based on the text, history, and purpose of the Equal Pay Act, the answer is clear: No.”

The plaintiff in the case was hired as a math consultant by the Fresno County Office of Education in 2009. When she was hired, her new salary was determined with the County’s “Standard Operating Procedure 1440,” which had been formally adopted by the County in 2004. That operating procedure dictated that a new hire’s salary was determined by “taking the hired individual’s prior salary, adding 5%, and placing the new employee on the corresponding step of the salary schedule.” The hiring schedule did not rely on employee experience to determine new employees’ initial salaries. After learning in 2012 that male colleagues had been hired into the same position at higher salary steps, the employee filed a complaint about the pay disparity, which eventually led to a lawsuit claiming a violation of the Equal Pay Act, among other claims.

After the district court denied the County’s motion for summary judgment, the Ninth Circuit Court of Appeals granted the County’s petition for permission to file an interlocutory appeal. A three-judge panel vacated the denial of summary judgment and remanded the case. The plaintiff petitioned the appeals court for rehearing en banc, and the petition was granted “in order to clarify the law.”

The en banc appeals court held that “[a]llowing an employer to justify a wage differential between men and women on the basis of prior salary is wholly inconsistent with the provisions of the Equal Pay Act,” which the Supreme Court noted in Corning Glass Works v. Brennan, 417 U.S. 188 (1974) is “broadly remedial, and it should be construed and applied so as to fulfill the underlying purposes which Congress sought to achieve.” The appeals court found that the catchall exception in the Equal Pay Act, a “factor other than sex” used by the County as an affirmative defense to explain the admittedly lower salaries for women could not apply to prior salary, as prior pay at the time of the passage of the Equal Pay Act “would have reflected a discriminatory marketplace that valued the equal work of one sex over the other. Congress simply could not have intended to allow employers to rely on these discriminatory wages as a justification for continuing to perpetuate wage differentials.”

The en banc appeals court also held that statutory interpretation also established that prior salary could not permissibly fall within the catchall exception in the Equal Pay Act because legitimate “factors other than sex” must be job related. Citing Washington County v. Gunther, 452 U.S. 161 (1981), the en banc appels court found that employers could continue to use their “legitimate, job-related means of setting pay but could not use sex directly, or indirectly as a basis for establishing employees’ wages.” One example of employers attempting to use the catchall exception as a way to use sex indirectly as a basis for establishing wages is found in Corning, where the Supreme Court “readily dismissed the notion that an employer may pay women less under the catchall exception because women cost less to employ, thus saving the employer money” and being a good “business reason.”

According to the en banc appeals court, prior salary does not fit within the catchall exception because it “is not a legitimate measure of work experience, ability, performance, or any other job-related quality,” and bears only an attenuated relationship to legitimate factors other than sex “such as training, education, ability, or experience.” More importantly, prior salary “may well operate to perpetuate the wage disparities prohibited under the Act,” according to the en banc appeals court, which instructed employers to “point directly to the underlying factors for which prior salary is a rough proxy, at best, if it is to prove its wage differential is justified under the catchall exception.”

For the above stated reasons, the Ninth Circuit Court of Appeals, sitting en banc, affirmed the denial of the County’s motion for summary judgment, and remanded the case.

Read the full case: Rizo v. Yovino

 


This case law update was written by Conor D. Dirks, Associate Attorney, Shaw Bransford & Roth, PC.

For thirty years, Shaw Bransford & Roth P.C. has provided superior representation on a wide range of federal employment law issues, from representing federal employees nationwide in administrative investigations, disciplinary and performance actions, and Bivens lawsuits, to handling security clearance adjudications and employment discrimination cases.

 

 

 

 

 

Posted in Case Law Update

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