9th Circuit Court of Appeals Considers Equal Pay Act

Can Employers Ask for and Base Salary Decisions on A Job Applicant’s Salary History Without Violating the Law?

FLB Law      May. 18, 2017
by Jacob M. Sitman and Gretchen L. Geisser

Earlier this year, Philadelphia enacted an ordinance and became the first city in the country to ban private-sector employers from asking job applicants about their salary history.  The ordinance is based on the theory that the use of salary history perpetuates historic discrimination against women, and the purpose of the ordinance is to close the wage gap between men and women.  Among other things, the ordinance prohibits employers from asking job applicants about their prior salary or requiring disclosure of salary history as a condition of employment, and prohibits employers from retaliating against prospective hires for not disclosing their salary history.  That ordinance was quickly challenged in court and enforcement is currently on hold.  However, other states and municipalities have enacted or have pending legislation that restrict employers’ ability to ask about and use information concerning applicant salary history in making hiring and pay decisions.

In the meantime, the United States Court of Appeals for the Ninth Circuit has issued a decision in the case of Rizo v. Yovino, No. 16-15372 (9th Cir. Apr. 27, 2017), finding that a California employer may not have discriminated against a female employee because of sex in violation of the Equal Pay Act by paying her less than male counterparts with the same qualifications who performed the same work.

In that case, the employer conceded those facts and asked the court to enter summary judgment in its favor, explaining that it based the female employee’s salary on the employee’s salary history, rather than on the employee’s sex.  The trial judge ruled that the employer could be found liable for discriminating based on sex in violation of the Equal Pay Act, reasoning that pay differences based solely on prior salary were inherently discriminatory as women’s prior salaries are likely to be lower than men’s due to gender bias.

The employer appealed, and the Ninth Circuit vacated the trial judge’s decision.  The Ninth Circuit found that an employee’s prior salary could be a “factor other than sex” for the employer’s salary decision and, as such, would not violate the Equal Pay Act.  The Ninth Circuit remanded the case back to the trial court to decide whether the employee’s salary history actually caused the salary differential, whether evaluation of salary history effectuated some business policy, and whether the employer used the employee’s salary history reasonably in light of its stated purpose.

The Ninth Circuit decision does not affect the Philadelphia ordinance, or employers on the East Coast.  But, the case does serve to illustrate that this is an area of law that is currently in flux and will continue to present challenges for employers as they look to attract talent and make pay and benefit decisions that are market competitive.  In the meantime, the best advice for employers is to keep abreast of legal developments and consult professionals for advice when questions arise.

If you have questions about Employment or the Equal Pay Act, contact one of our Employment or Litigation attorneys at (610) 797-9000.

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