The Ninth Circuit’s recent ruling could be a significant step towards eliminating gender pay discrimination in the workplace. The federal Equal Pay Act of 1963 attempted to eliminate gender wage discrimination by prohibiting employers from paying male employees higher wages than female employees for the same work.1 There were four exceptions to the general rule of the Act: if the employer used a seniority system, merit system, a system based on quantity or quality of a product, or a pay differential based on some factor other than sex.2 Until Rizo v. Yovino, employers had been using the last exception to bring in a worker’s past salary to justify paying a woman less than a man.
The holding overturns the longstanding rule from Kouba v. Allstate Insurance Co., which found that one’s past salary was a “factor other than sex” and allowed employers to use past salary to discriminate against women.3 Rizo shows how employers would use past salaries to exploit previous discrimination.4 Specifically, Aileen Rizo was hired as a math consultant for the Fresno County Office of Education in 2009. The payment system requires that a new hire’s salary be determined by taking the hired individual’s prior salary, adding 5%, and placing a new employee on the corresponding step of the salary schedule.5 During lunch with some of her colleagues in 2012, Rizo learned that some of her male colleagues had been hired at higher starting salary steps. In June 2015, the County moved for a summary judgment claiming that even though Rizo earned less than her male counterparts for the same work, this disparity was due to her prior salary.6 In other words, the County used prior salary as a factor other than sex to create an affirmative defense and explain the wage disparity. The district court denied the summary judgment and certified the legal question for interlocutory appeal.
The Ninth Circuit opinion, written by the late Judge Stephen Reinhardt, first notes that the Equal Pay Act was created to ensure that men and women received the same pay for the same work, regardless of sex.7 The Act created strict liability for employers who pay men and women different wages for the same work in that a plaintiff does not need to show any discriminatory intent on the part of the employer. Reinhardt declares that it would be “inconceivable that Congress, in an Act the primary purpose of which was to eliminate long-existing ‘endemic’ sex-based wage disparities, would create an exception for basing new hires’ salaries on those very disparities—disparities that Congress declared are not only related to sex but caused by sex.”8 An acceptance of the County’s argument would perpetuate the same activities that the Act was created to prevent. He then restricts the factors other than sex exception to legitimate factors like experience, educational background, and prior job performance. In arriving at this conclusion, Reinhardt examined the legislative history and purpose of the Act.9
While the holding of the case seems like a great outcome in the fight for pay equality, some of the other concurring judges believed that the holding was too broad and could end up negatively impacting women in future salary negotiations. Judge McKeown stated that while she agreed with most of the majority opinion, she thought it went too far in stating that any consideration of prior pay was impermissible under the Act.10 McKeown believes that prior salary should still be a factor in setting an employee’s initial wages. As long as prior salary is used in conjunction with another job-related factor, then it may still be an appropriate factor for employers to consider. Employees might want to use their prior salary as a bargaining chip to obtain a higher wage at a new company.11 Judge Callahan echoed some of McKeown’s concerns. She argued that past salary can enable employers to set a competitive starting salary and lure potential employees.12
Ultimately, the concurring justices are correct. It makes the most sense to narrow the holding to prohibiting the use of prior salary as a standalone defense to wage discrepancies. This would still allow potential employees to use prior salary as a bargaining chip and permit employers to use prior salary when determining a competitive starting salary. In any event, there is a chance that this case could get appealed to the Supreme Court which could allow the holding to be further refined or even potentially reversed.