Federal Appeals Court Holds That Prior Salary Is Not a Justification for Unequal Pay

The Ninth Circuit Rules That Prior Salary is Not a Valid Reason for Paying Men and Women Differently for Equal Work.

On April 9, 2018, the United States Court of Appeals for the Ninth Circuit considered whether employers can pay men and women differently for the same work based on their salaries at previous positions. This is an issue that courts have dealt with differently over the years—some holding that prior salary alone can justify a discrepancy in pay, with others holding the opposite. In a landmark holding, the Ninth Circuit held that prior salary can never justify a difference in pay, either alone or in combination with other factors. (Rizo v. Yovino, No. 16-15372 (9th Cir. Apr. 9, 2018).)

The Equal Pay Act (EPA), 29 U.S.C.A. § 206(d)(1), is a federal law that prohibits gender-based pay discrimination. The EPA requires employers to pay men and women equal wages for equal work. Jobs are considered equal when they are performed under similar working conditions and require equal skill, effort, and responsibility. However, the law does allow employers to differentiate pay based on seniority, merit, the quality or quantity of production, or "any other factor other than sex." Over the years, courts have grappled with whether an employee's prior salary qualifies under this last category as a legitimate factor other than sex.

This week, the Ninth Circuit clarified the issue, holding that prior salary can never be used to justify paying men and women differently for equal work. In doing so, it overruled a 1982 decision that allowed employers to consider prior salary (Kouba v. Allstate Ins. Co., 691 F.2d 873 (9th Cir. 1982)). The court acknowledged that relying on an employee's prior salary perpetuated gender-based pay discrimination because women have historically been paid much lower than men for the same work.

For employers to rely on any "factor other than sex," it must be a job-related reason—such as an employee's experience, education, or prior job performance. Per the Ninth Circuit's holding, an employee's prior salary is not job-related and cannot be considered in setting pay.

Effective date: April 9, 2018