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Prior salary alone or in combination with other factors cannot justify a wage differential between male and female employees. (Ninth Circuit)

April 17, 2018

 

In Rizo v. Yovino, the Ninth Circuit overruled its earlier precedent and held that prior pay differentials are not a “factor other than sex” upon which a wage differential may be justified under the Equal Pay Act of 1963 (EPA). The EPA is a federal law that prohibits employers from discriminating on the basis of sex by paying employees a lesser rate of pay than that paid to employees of the opposite sex. The law provides for certain exceptions, where such payment is made pursuant to:  (i) a seniority system; (ii) a merit system; (iii) a system which measures earnings by quantity or quality of production; or (iv) a differential based on any other factor other than sex. Prior to its decision in Rizo, the Ninth Circuit previously held that the EPA did not impose a strict prohibition against the use of prior salary as a factor when based on a reasonable business reason. Kouba v. Allstate Ins. Co. 691 F.2d 873 (9th Cir. 1982). The Ninth Circuit’s decision in Rizo, however, explicitly overturned the Kouba decision. 

 

The lawsuit was brought by Aileen Rizo, a high school math teacher employed by Fresno County Office of Education. The County determined teachers’ salaries using a method that consisted of 10 stepped salary levels. Under that system, the initial salary was determined by taking the newly hired teacher’s salary, adding five percent, and then placing the teacher in the corresponding stepped salary level. After working for the County for several years, Rizo learned that her male colleagues were placed at higher levels than her and therefore earning higher wages. The County did not dispute that Rizo was paid less for performing the same work and that none of the first three specific statutory exceptions applied. Instead, the County relied on the fourth catchall exception to the EPA, arguing that “any other factor other than sex” included an employee’s prior salary and applied when the starting salary was based on the prior salary. 

 

In its analysis, the Court analyzed the legislature’s intent. It noted that the EPA was broadly intended as remedial. The goal was the elimination of discrimination and injustice of unequal pay between the sexes. At the time of the EPA’s passage employees’ prior pay would have reflected a discriminatory marketplace that valued the equal work of one sex over the other. As such, Congress would not have intended to allow employers to rely on discriminatory wages as a justification for continuing to perpetuate wage differentials. 

 

The Court also analyzed the legislature’s intent in drafting the EPA’s exceptions and catchall provision. At the time the EPA was enacted, there were concerns among employers that there were many nondiscriminatory and job-related reasons for pay differentials that might fall outside the first three exceptions to the law. The Court further noted that the catchall provision required a reason other than sex. It, therefore, asserted that, in order to qualify under the catchall provision, an employer’s reason must be job-related. The Court noted that prior salary does not fit within the catchall provision, because it is not a legitimate measure of work experience, ability, performance, or any other job-related quality. 

 

This case opens the door for more individuals seeking to bring claims under the EPA. However, it should be noted that California’s equivalent of the EPA already prohibits the use of prior salaries as a defense to pay differentials. Nonetheless, this case allows other options for employees seeking to bring claims for discriminatory pay practices.   

 

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