Following the 9th Circuit’s April 2018 decision in Rizo v. Yovino, circuits were split on the question of whether past salary information can be a relevant factor in a company’s defense against Equal Pay litigation.1 Following the Rizo decision and the passage of state and local legislation banning the use of salary history in compensation decision, companies have been scrambling to resolve any pay gaps that could only be explained using employee’s past compensation.2 However, in February 2019 the US Supreme Court vacated the 9th Circuit’s decision in Rizo. While this does not change the facts on the ground for businesses in jurisdictions with strengthened equal pay laws, it has temporarily resolved the circuit split for using pay history as a defense to federal Equal Pay Act.
9th Circuit Review
Aileen Rizo brought suit against her employer, the Fresno County Office of Education, after discovering that her male coworker with less seniority was paid more than her.3 Fresno County utilized a standardized process to determine starting wages for employees dependent upon applicant’s compensation history. In addressing the Equal Pay Act implications, the 9th Circuit refused to allow employers to use prior salary history as a defense to Equal Pay violation. “In light of the clear intent and purpose of the Equal Pay Act, it is equally clear that we cannot construe the catchall exception as justifying setting employees’ starting salaries on the basis of their prior pay.”4 If courts were to allow the use of prior compensation history in defending possible Equal Pay Act violations, the worry would be that this defense would permit employers to perpetuate the ongoing wage gap between men and women.
In February 2019, the US Supreme Court granted cert to review the 9th Circuit’s decision. Without actually ruling on the substance of the case, SCOTUS vacated the result and remanded the case back to the 9th Circuit. SCOTUS based its ruling on the fact that Judge Reinhardt, the author of the opinion and deciding vote for the majority, passed away in the intervening time between when the 9th Circuit voting was completed and the decision was published.5 “The Ninth Circuit did not expressly explain why it concluded that it could count Judge Reinhardt’s opinion as ‘[t]he majority opinion’ even though it was not endorsed by a majority of the living judges at the time of issuance.”6 As a procedural issue, SCOTUS was clear that judges must be alive at the time a decision is published in order to consider their vote valid. In a rhetorical flourish, “federal judges are appointed for life, not for eternity.”7 Given that the 9th Circuit’s prior decision required Judge Reinhardt for a majority, it is unclear whether any new decision would have the same holding banning the use of salary history in compensation decisions.
Although Rizo v. Yovino applied only to the 9th Circuit, businesses with offices across the US were effectively required to re-evaluate both their current pay practices as well as their hiring practices. Even without the Rizo decision, 13 states have unilaterally banned employers from asking about pay history from job applicants.8 This has direct implications not only for litigation potential for companies with employees within the 9th Circuit, but also has direct implications for business recruiting and interviewing procedures.
In terms of recruiting policies, executives and compensation professionals likely need to take two actions. Most directly for employers with employees in jurisdictions where pay history questions have been banned, managers must not ask or seek to find prior salary history on applicants. As of May 2018, companies ranging from Amazon to Bank of America have taken the proactive step to remove any question about pay history from their hiring process.9
In addition to re-evaluating their recruiting processes, employers also likely need to assess whether any pay differential between men and women can be accounted for by factors other than pay history. These assessments likely should be conducted under the protection of attorney client privilege in order to not create additional risk of liability.10 If employers choose to simply not evaluate these issues or to continue asking for salary history during the hiring process, they actively run the risk that prior salary will not be a defense to Equal Pay Act allegations in the future.
Liz Elting, How the Rizo Case Will Affect The Gender Pay Gap, Forbes (April 13, 2018), https://www.forbes.com/sites/lizelting/2018/04/13/how-the-rizo-case-will-affect-the-gender-pay-gap/. ↩
Yuki Noguchi, #MeToo Awareness Sharpens Focus On Pay Equity, NPR (March 8, 2019), https://www.npr.org/2019/03/08/701169339/-metoo-awareness-sharpens-focus-on-pay-equity. ↩
Rizo v. Yovino, 887 F.3d 453 (2018). ↩
Id. at 461. ↩
Rizo v Yovino, 139 S.Ct. 706, 708 (2019). ↩
Id. at708. ↩
Id. at710. ↩
Salary History Bans, HR Dive (Feb. 20, 2019), https://www.hrdive.com/news/salary-history-ban-states-list/516662/. ↩
Yuki Noguchi, More Employers Avoid Legal Minefield By Not Asking About Pay History, NPR (May 3, 2018), https://www.npr.org/2018/05/03/608126494/more-employers-avoid-legal-minefield-by-not-asking-about-pay-history. ↩
Jeffrey M. Landes & Ann Knuckles Mahoney, Conducting Pay Equity Audits, Lexis Practice Advisor J. (April 18, 2018), https://www.lexisnexis.com/lexis-practice-advisor/the-journal/b/lpa/posts/conducting-pay-equity-audits. ↩