SAN FRANCISCO (CN) – The en banc Ninth Circuit ruled Monday that employers can't justify different pay grades for male and female employees by using salary history alone, overturning more than three decades of circuit case law.
"To hold otherwise – to allow employers to capitalize on the persistence of the wage gap and perpetuate that gap ad infinitum – would be contrary to the text and history of the Equal Pay Act, and would vitiate the very purpose for which the Act stands," U.S. Circuit Judge Stephen Reinhardt wrote for the court in one of his final opinions before his death in March.
Math consultant Aileen Rizo sued the Fresno, California, school district in 2014 under the Equal Pay Act, which requires employers to pay women and men the same wages for the same job. She claimed the district paid her thousands of dollars less than three male colleagues to instruct the county’s math teachers despite having more experience.
The school district moved for summary judgment, denying gender discrimination was the reason it paid Rizo less. An employer is exempt from the Equal Pay Act if it can show that a difference in pay is due to one of four exceptions. Fresno relied on the law’s fourth exception to argue that the wage disparity between Rizo and her male colleagues instead stemmed from its pay structure and not a "factor other than sex.”
Fresno's pay structure, implemented in 2004, bases an incoming employee's salary solely on salary history. Management-level employees like Rizo get a 5 percent increase from their previous salary and a bonus for a master’s degree. Rizo earned $62,133, the minimum starting salary for a management-level educator in Fresno.
Rizo argued that because women are paid less than men for the same job, salary history is not a "factor other than sex" and using it to set starting pay is illegal.
Fresno countered the Ninth Circuit had already decided in 1982's Kouba v. Allstate Ins. Co. that the Equal Pay Act allows an employer to consider prior salary in setting starting pay.
In Kouba, the court held that an employer seeking to justify a pay disparity as based on a factor other than sex must prove it has an "acceptable business reason" for doing so.
Fresno said it based starting salaries on salary history to ensure a fair compensation structure, attract quality employees and spend taxpayer dollars responsibly – all legitimate business reasons, it argued.
But U.S. Magistrate Judge Michael Seng denied Fresno’s motion in 2015, finding its pay structure perpetuates wage disparities between male and female employees.
He refused to consider Kouba, pointing out that salary history was one of several factors the employer in that case considered in setting salaries but the only factor Fresno considered.
Last April, a three-judge Ninth Circuit panel made up of Senior U.S. Circuit Judge A. Wallace Tashima, U.S. Circuit Judge Andrew Hurwitz and U.S. District Judge Lynn Adelman of the Eastern District of Wisconsin concluded they were bound by Kouba and held prior salary can be a factor other than sex if the defendant shows that its use of prior salary is reasonable and achieves a business purpose.