It is not uncommon for employers to establish hiring policies that set the salary of new hires at 5% more than their prior salary. On the surface, this type of policy is not based on sex. However, the question is whether this type of policy can be seen as a violation of the Equal Pay Act. This issue was addressed by the Ninth Circuit recently.
Allegations of unequal pay between sexes
Aileen Rizo became an employee of the public school system in Fresno, California. When she was first hired, she was offered a salary that was 5% more than the last salary she earned. This was the hiring policy of the school system. Several years later, Rizo realized that she was being paid less than her male co-workers to perform the same job.
Lawsuit alleging violations of Equal Pay Act
Rizo filed a lawsuit against her employer for the pay disparity, alleging a violation of the Equal Pay Act. The problem was that her male counterparts’ salaries were set using the same school system policy of adding 5% to the most recent prior salary. In defense, her employee showed that its policy was based on a “factor other than sex,” which is a defense to Equal Pay Act claims.
The hiring policy regarding salary
According to the employer, its policy was objective because it offered a 5% raise for every employee, in an effort to encourage desired applicants. The policy was also intended to avoid favoritism and guarantee consistency. The Court agreed that a wage differential based on a gender-neutral factor, such as prior salary qualifies as a “factor other than sex,” as long as the employer can demonstrate that the factor “effectuates some business policy.”
Conflict between federal and state law
While this federal court’s interpretation of the federal Equal Pay Act may have led to the dismissal of this discriminatory pay case, the decision seems at odds with the California state Fair Pay Act. That state law, at one time, was nearly the same as the federal Equal Pay Act, but with recent amendments now provides more protections for California employees. More specifically, a very recent amendment states that prior salary by itself will not serve as a justification of a pay disparity.
California is one of many different states that have limited an employers’ use of a prior pay history when establishing salaries. In 2016, Massachusetts became the first state to pass a law prohibiting employers from requesting a prospective employee’s wage history. In January 2017, Philadelphia became the first city to do so. Alabama does not have comparable equal pay laws.
What is meant by equal pay?
A common misconception is that the Equal Pay Act requires that every employee receives the same total amount of compensation. On the contrary, if one employee receives more total compensation because of he is more productive, that may not violate the EPA. However, the Act requires more than simply equal wages. Equality in fringe benefits, such as health and life insurance coverage, retirement plans or pensions, etc., is also required.
If you feel you have been the victim of discrimination or retaliation, or if you have any questions regarding your employment rights, please contact Wrady & Michel, LLC, either online or by calling us at (205) 265-1880.