 Early last month on April 9, 2018, the U.S. Court of Appeals for the Ninth Circuit released an en banc ruling in Rizo v. Yovino, No. 16-15372[1], holding that an employer cannot use “prior salary alone or in combination with other factors” to justify a wage differential between male and female employees. This decision joins a larger trend across the US where a number of states and cities are rejecting the use of salary history in determining applicant pay. There is a split among circuits on this issue, which makes it ripe for the Supreme Court to step-in and resolve, but it is too early to know if it will—stay tuned! The Equal Pay Act of 1963[2] prohibits paying men and women differently for the same or substantially similar work, “except where such payment is made pursuant to (i) a seniority system; (ii) a merit system; (iii) a system which measures earnings by quantity or quality of production; or (iv) a differential based on any other factor other than sex.” Rizo learned that her employer hired male colleagues at a significantly higher rate of pay for similar work. Rizo’s employer admitted paying the male colleagues more than her, but argued the wage differential was a result of their higher prior salaries at the time they were hired and fell under the forth catchall exception. The court disagreed and provided a narrow reading of “any other factor other than sex” stating that “[it] is limited to legitimate, job-related factors such as a prospective employee’s experience, educational background, ability, or prior job performance.” Does this decision affect your organization and what should you be doing?
If you have employees in the states of Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon or Washington, which make up the Ninth Circuit, you should evaluate and reconsider your pay practices and specifically what role, if any, salary history plays in your hiring process. Even if you do not have employees in one of these states, you might want to use this as a cautionary tale and consider taking a proactive approach now. This case raises an opportunity for you to review and update your policies, procedures, practices, and online and print applications and eliminate areas seeking prior salary information. Additionally, you may want to consider conducting a compensation audit to determine if there are potential pay disparities within job classifications and, if so, decide if there is a legitimate justification or if corrective action is needed. Remember, as a best practice use objective determinations, such as experience or performance, to set rate of pay to be offered to employees hired for particular roles. [1] Opinion can be found at https://cdn.ca9.uscourts.gov/datastore/opinions/2018/04/09/16-15372.pdf [2] EPA can be found at https://www.eeoc.gov/laws/statutes/epa.cfm Comments are closed.
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