En Banc 9th Circuit Rules Unequal Pay Cannot be Justified by Salary History

The Ninth Circuit, sitting en banc, recently held that an employee’s prior salary does not constitute a “factor other than sex” upon which a wage differential may be based under the statutory “catchall” exception set forth in the Equal Pay Act, 29 U.S.C. § 206(d)(1).  The court ruled that a factor other than sex must be one that is “job related,” rather than one that “effectuates some business policy.”

Additionally, the court declared that it is “impermissible to rely on prior salary to set initial wages,” because doing so would “perpetuate the very gender-based assumptions about the value of work that the Equal Pay Act was designed to end.”  The court, however, noted that it was expressing “a general rule” only and was not attempting to resolve the rule’s “applications under all circumstances.”  For example, the court explained that it was not deciding “whether or under what circumstances” past salary may play a role in an individualized salary negotiation.

The Equal Pay Act dictates that employers may not discriminate “between employees on the basis of sex by paying” lower wages to certain employees than it pays employees of the opposite sex for equal work on jobs which require “equal skill, effort, and responsibility,” and are performed under similar working conditions.  The provision provides four narrow exceptions, in which unequal payment between the sexes is not prohibited.  The last exception, known as the “catchall exception,” provides that unequal payment is excepted under the Act where such payment is made pursuant to “a differential based on any other factor other than sex.”

In the present case, the defendant-employer used a female employee’s prior salary to justify discrepancies between her salary and those of comparable male employees who were paid more for completing the same work.  The defendant-employer argued that her prior salary qualified as a “factor other than sex” within the meaning of the catchall exception and thus, that the unequal payment was allowed under the Equal Pay Act.

The en banc court disagreed.  It ruled that the meaning of the phrase “any 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.”  The court found it “inconceivable” that Congress would create an exception which allowed the defendant “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.”  It further held that “prior salary, whether considered alone or with other factors, is not job related” and thus cannot qualify as an exception to the Act.

For the reasons stated above, the court found that prior salary does not constitute a “factor other than sex,” and therefore, the defendant failed as a matter of law to set forth an affirmative defense.  In issuing this opinion, the court overruled its prior decision in Kouba v. Allstate Insurance Co.—a case which concluded that “the Equal Pay Act does not impose a strict prohibition against the use of prior salary.”

With the Rizo decision, the Ninth Circuit joins the Eleventh and Second Circuits, which have both determined that factors “other than sex” must be job-related or for a “legitimate business reason.”  The court also noted the Supreme Court’s decision in Corning, which “dismissed the notion that an employer may pay women less under the catchall exception because women cost less to employ, thus saving the employer money.”  Congress and the Supreme Court have also rejected the notion that “an employer may pay women less under the catchall exception because women cost more to employ.”

The court affirmed the district court’s denial of summary judgment to the defendant and remanded the case to the district court for further proceedings.

The case is Rizo v. Yovino.