The U.S. 9th Circuit Court of Appeals, arguably on the other end of the spectrum from the conservative-leaning 5th Circuit Court, has ruled that setting a new hire’s wages based solely on that person’s salary history can perpetuate discriminatory inequality under the federal Equal Pay Act (EPA).
The court, in Rizo v. Yovino, reasoned that employers should not be permitted “to capitalize on the persistence of the wage gap and perpetuate the gap ad infinitum.”
The plaintiff, Aileen Rizo, challenged the hiring practice of Fresno County, Calif., whose standard was to base new hires’ salaries on their most recent salary plus 5 percent, which it did when it hired her.
In her lawsuit, Rizo argued that the county’s hiring practice was discriminatory and in violation of the EPA.
The county countered that the text of the EPA permits businesses to establish salaries on any “factor other than sex,” and thus salary history is a valid criterion.
The district court hearing the case denied summary judgment to the county, which appealed. A three-judge panel of the circuit court sided with the county, leading to the April 2018 en banc decision of the full court.
The question before the full court then became, “Can an employer justify a wage differential between male and female employees by relying solely on prior salary?” The jurists answered “no.”
The decision overturned long-standing legal precedent in California. It explicitly overruled the court’s own 1982 decision in Kouba v. Allstate Insurance Co. Kouba, which held that using prior salary to set compensation was defensible under the EPA because the EPA permits employers to use any ”factor other than sex” in setting pay – and prior salary is a “factor other than sex.”
As a result of Rizo, employers within the 9th Circuit’s jurisdiction – Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington – should avoid using salary alone history in setting new hires’ wages.