On April 9, 2018, the Ninth Circuit Court of Appeals issued its opinion in Rizo v. Yovino, holding that employers cannot consider an employee’s prior salary either alone or in combination with other factors to justify salary differentials between men and women for the purposes of the federal Equal Pay Act.

Aileen Rizo was hired by the Fresno County Superintendent of Schools (the “County”) as a math consultant. During the hiring process the County asked for Rizo’s recent, prior salary. When the County offered Rizo a position, it was about five percent higher than what she previously earned, but was the lowest rung of the county’s salary schedule. Rizo accepted the position, but later learned that she was being paid less than her male counterparts. She then sued under the federal Equal Pay Act.

The County argued at summary judgment that its pay schedule was determined solely by an applicant’s prior pay, not gender. Within the meaning of the federal Equal Pay Act, the prior pay was a “factor other than sex.” In denying summary judgment, the U.S. District Court warned that setting salary and wages based solely on prior pay carries a high risk of perpetuating the discriminatory wage disparity between men and women. Even if motivated by a non-discriminatory business consideration, such a practice cannot be allowed to continue.

The Ninth Circuit Court of Appeal, sitting en banc, affirmed the District Court’s ruling. Prior salary, the panel held, simply cannot be used solely or even as part of multiple other factors to justify differential pay between men and women. The Court reasoned that holding to the contrary would allow employers to benefit from the ongoing wage gap, enabling that gap to perpetuate indefinitely.

Judges Margret McKeown and Mary Murguia concurred with the panel’s decision that County’s sole reliance on Rizo’s prior pay was impermissible, but noted that the majority may have gone too far in holding that any consideration of prior pay as a factor in setting salary is not allowed under the Equal Pay Act. Likewise, Judges Consuelo Callahan and Richard Tallman agreed that prior salary cannot be the sole basis for setting salary, but stated there may be times when consideration of prior pay with other factors may be permissible. To hold otherwise, in their view, ignored the simple realities of business.

The State of California has already taken a similar approach with the 2015 amendments to the California Equal Pay Act (A.B. 1676), signed by Governor Brown, and effective January 1, 2016.  However, the Court’s decision here explicitly overturned the Court’s 1982 prior holding in Kouba v. Allstate Insurance Co., 691 F.2d 873 (9th Cir. 1982), which held that an employee’s prior pay was a factor other than sex for the purposes of the federal Equal Pay Act and can therefore be considered. This new ruling also contradicts the holdings of other federal circuits. Whether the U.S. Supreme Court will be called upon to reconcile the various holdings remains to be seen.

For the time being, employers within the Ninth Circuit may be in violation of both the federal Equal Pay Act and the California Equal Pay Act if any consideration is given to an employee’s prior salary.

If you have any questions about this case, please contact Shane Larsen or Dale Kuykendall in Jackson Lewis’ Sacramento office, or the Jackson Lewis attorney with whom you regularly work.