Will the Supreme Court Prohibit Employers From Considering Salary History in Setting Pay?

Category: Blog Posts
Date: Feb 5, 2019 12:48 PM
Will the Supreme Court Prohibit Employers From Considering Salary History in Setting Pay?

This post was authored by Megan Lewis.

The United States Supreme Court may be gearing up to decide whether, under the Equal Pay Act, employers can consider an employee’s previous salary history when setting the employee’s rate of pay.  In doing so, the Court could clarify an area of the Equal Pay Act that has been interpreted differently by the various Circuit Courts of Appeal.

Under the federal Equal Pay Act, if an employer is paying an employee less than an employee of the opposite sex for work requiring the same skill, effort, and responsibility, which is performed under similar working conditions, the employer must be able to demonstrate that the disparity is based on one of the following:

  • seniority system;
  • a merit system;
  • a system which measures earnings by quantity or quality of production; or
  • a differential based on any other factor other than sex.

The first three exceptions are fairly straightforward, but the fourth (which is also known as the “catchall” exception) has often been the subject of litigation.

In April 2018, the Ninth Circuit ruled in Rizo v. Yovino that salary history is not a “factor other than sex” for purposes of the Equal Pay Act, meaning that employers cannot rely on an applicant’s prior salary history to justify paying one employee differently than another employee of the opposite sex for similar work.  The Ninth Circuit held that the only “factor[s] other than sex” that employers can use to justify a wage disparity are “legitimate, job-related factors such as a prospective employee’s experience, educational background, ability, or prior job performance.”

Jim Yovino, the Fresno County Superintendent of Schools, filed a petition for writ of certiorari asking the U.S. Supreme Court to review the Ninth Circuit’s decision because the Circuit Courts of Appeal do not agree on whether prior salary is a “factor other than sex.”  The Eleventh Circuit, like the Ninth Circuit, has held that the “factor other than sex” exception to the Equal Pay Act is limited to “job-related factors.”  The Seventh Circuit, on the other hand, has reached the exact opposite conclusion and held that employers can consider prior salary in setting pay.  The Second Circuit lands somewhere in the middle, holding that the “factor other than sex” exception applies to “business-related reasons,” which is likely less restrictive than the approach taken by the Ninth and Eleventh Circuits.

The Court is likely to decide the fate of Yovino’s petition in the coming weeks, possibly as soon as later this month.

If the Supreme Court ultimately affirms the Ninth Circuit’s decision in Rizo, the Ninth’s Circuit’s standard (under which only “job-related factors” can be a “factor other than sex”) could become the nationwide standard.  However, even if the Court were to overturn Rizo, state and local legislation regarding the right of employers to consider salary history in setting pay would remain in effect.  For instance, California employers would still be required to comply with the provisions of AB 168, which restricts the ability of employers to gather applicants’ salary history information or consider such information when determining whether to offer employment to an applicant and/or what salary to offer.  The same is true for employers in other states (Massachusetts, Delaware, and Oregon) and cities (New York, San Francisco, Boston, and Philadelphia) that have passed similar legislation.

We are watching this case closely, and we will provide updates as soon as they become available.

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