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Employers May Not Use Salary History to Justify Male/Female Pay Differences  (april 2018)

Over the last few years, the use of prior salary history has been made unlawful in multiple jurisdictions, on the basis that prior salary history has the effect of suppressing wages/salary and results in wage/salary disparity - especially for women.

The federal Equal Pay Act (“EPA”) of 1963, mandates equal pay for equal work regardless of sex. Different wages for the same work are strictly liable unless they can show that one or more of four exceptions apply:
             1. SENIORITY
             2. MERIT
             3. WORK QUANTITY or QUALITY or
             4. “ANY OTHER FACTOR OTHER THAN SEX.”  

​The Ninth Circuit recently took up the question of the meaning of the fourth– in order to consider whether an employer may rely, in whole or in part, on an employee’s prior salary as a basis for explaining a pay differential in the Rizo v. Yovino, No. 16-15372 (Apr. 9, 2018). http://cdn.ca9.uscourts.gov/datastore/opinions/2018/04/09/16-15372.pdf

Under the ruling, prior salary alone or in combination with other factors cannot justify a wage differential between male and female employees under the Equal Pay Act, the U.S. Court of Appeals for the Ninth Circuit has held in an entire bench decision.  
This decision overturns the 2017 decision of a three-judge panel of the Ninth Circuit and the Court’s 1982 decision holding that prior salary was a permissible “factor other than sex” under the Equal Pay Act. Kouba v. Allstate Ins. Co., 691 F.3d 873 (9th Cir. 1982).
 
The Ninth Circuit has jurisdiction over Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington.

Thus, employers operating within the Ninth Circuit may want to evaluate what role, if any, prior salary plays in its decisions in connection with setting current or starting pay for job applicants.  If there are disparities and they cannot be justified by lawful factors, your organization could be at-risk for a charge of discrimination.  HRextension can help identify if your company is at risk.