Ninth Circuit Bars "Salary History" Defense in Pay Equity Suits—Sort Of

April 13, 2018

This week, a confusing ruling by the Ninth Circuit raised questions regarding how employers may factor a prospective employee's salary history into pay decisions.  In Rizo v. Yovino, the court expressed the "general rule" that an employee's "prior salary alone or in combination with other factors" cannot be used by employers as a defense against allegations of pay discrimination under the Equal Pay Act.  At the same time, however, the court did not decide "whether or under what circumstances past salary" may be used when negotiating individual salaries.  This means that how an employer can engage in such negotiations without being accused of relying on prior salary will have to be determined through subsequent litigation.  The Equal Pay Act prohibits paying men and women differently for the same work, with four exceptions: employers can pay workers differently if they do so based on 1) seniority, 2) merit, 3) the quantity or quality of the employee's work, or 4) "any other factor other than sex."  The decision by the Ninth Circuit places it directly at odds with the Seventh Circuit, which has held salary history is always a "factor other than sex."  Notably, in a separate concurring opinion in Rizo v. Yovino, Judges Callahan and Tallman rejected the majority's conclusion that salary history can never be a factor in pay decisions because it "fails to follow Supreme Court precedent, unnecessarily ignores the realities of business and, in doing so, may hinder rather than promote equal pay for equal work."  Attorneys for the employer plan to appeal the decision to the U.S. Supreme Court.