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Can Prior Salary Be a Defense in Equal Pay Claims?

The Equal Pay Act makes it illegal for employers to pay men and women different salaries when they perform substantially similar work. However, employers often defend against these claims by proving that there were legitimate, non-discriminatory reasons for the difference in pay. In the past, courts recognized an employee’s prior salary as a legitimate, non-discriminatory reason for the lower pay they received. However, a recent decision handed down by the 9th Circuit in Rizo v. Yovino demonstrates a shift in the availability of this defense.

Laws prohibiting disclosure of prior salary history

It is common for employers to ask applicants about their salary histories so that the employers could consider the applicant’s salary expectations when determining where to set the offered salary for a new employee. That also means that prior history can be used as a legitimate, non-discriminatory reason for the chosen salary. A few states have actually passed laws that prohibit employers from requesting prior salary history from applicants or employees, primarily because doing so perpetuates gender pay discrimination. Put another way, if a woman is receiving lower pay for discriminatory reasons then continue to pay her at that rate will simply perpetuate the discrimination. This would be true even if the new employer is not intentionally acting in a discriminatory manner. At the present, there are only a few states that have passed this law, but some believe the decision in Rizo could change that.

The decision in Rizo v. Yovino

In the April 9, 2018 decision of the 9th Circuit, some believe the court has overturned decades of case law interpreting the Equal Pay Act to allow employers to consider prior salary history in making pay decisions, at least in that jurisdiction. In that case, Rizo was hired by Fresno County as a math consultant. The County has a policy of setting teacher’s salaries based on their former salary plus 5%. With that calculation, the teacher’s salary is placed at the appropriate step of the County’s pay scale. However, Rizo’s offered salary, after being calculated under the policy, was lower than the male math consultants. The Ninth Circuit heard the case in order to clarify whether prior salary history alone or when combined with other factors, could be a legitimate reason “other than sex” to justify the difference in salary. The Court decided it could not. In fact, the Court went further to say that prior salary should never be a legitimate business factor even when considered along with other factors.

What does this mean?

Based on this ruling, employers within the Ninth Circuit should never ask about prior salary history when setting the salary for an applicant or employee. The decision does not address how to handle the situation where an employee or applicant volunteers that information, which often occurs when negotiating pay rates. Although this decision is not binding on employers in Alabama, this could signal a trend. It will be interesting to see if the United States Supreme Court will take up this issue and, if so, what the outcome will be. If you feel you have been the victim of discrimination or retaliation in the workplace, or if you have any other questions regarding your employment rights, please contact the experienced employment law attorneys at Wrady & Michel, LLC. You can contact us either online or by calling us at (205) 265-1880. We are here to serve you!