Federal appeals court: considering employee pay history violates Equal Pay Act

Federal appeals court: considering employee pay history violates Equal Pay Act

The US Court of Appeals for the Ninth Circuit [official website] on Monday struck down [text, PDF] a California school district’s employee pay system, holding that using employee pay history to determine salary violates the Equal Pay Act [text].

The case arose from a dispute between a female employee and the Fresno County Office of Education. The employee received a salary lower than her male coworkers who performed the same jobs. In determining her salary, the county used the employee’s previous salary and added five percent. The employee challenged the procedure under the Equal Pay Act, and the US District Court for the Eastern District of California [official website] ruled in her favor, finding that consideration of prior pay indeed violated the Equal Pay Act. The circuit court heard the case en banc to resolve the question, “can an employer justify a wage differential between male and female employees by relying on prior salary?”

The county argued the difference in the female employee’s salary was a result of her pay history, and thus constituted an exception to Section 206 of the Equal Pay Act, which permits wage discrepancies when the considered factor is “any other factor other than sex.” The court pushed back against this argument saying: “[h]owever, this would allow the County to defend a sex-based salary differential on the basis of the very sex- based salary differentials the Equal Pay Act was designed to cure.”

The court upheld the district court’s denial of summary judgment and interpreted the catchall provision to exclude employee pay history, stating:

“[A]ny other factor other than sex” is limited to legitimate, job-related factors such as a prospective employee’s experience, educational background, ability, or prior job performance. It is 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.

A three-judge panel of this court reached [text, PDF] the opposite conclusion last April, finding [JURIST report] prior pay alone can constitute “any other factor other than sex,” so long as “the defendant shows that its use of prior salary was reasonable and effectuated a business policy.” The case was remanded to the district court to determine whether the county used prior pay reasonably. The court’s prior opinion relied on case precedent that permitted prior pay consideration, when prior salary “effectuate[s] some business policy” and the employer uses prior salary “reasonably in light of [its] stated purpose as well as its other practices.”

The court’s decision in the instant case effectively overturns the prior precedent. In support of this, the court focused on the realities of the astounding wage gap between men and women, and Congress’s intent to remedy the discrepancies through the Equal Pay Act.