Earlier this month, the Ninth Circuit Court of Appeals made clear that prior salary alone or in combination with other factors cannot justify a wage differential between male and female employees. The Equal Pay Act requires employers to provide equal pay for equal work, regardless of sex. However, employers may pay male and female employees differently based on: (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. In Rizo v. Yovino, the employer asserted that prior pay history was a “factor other than sex” which justified paying the female plaintiff less than her male counterparts. The Court disagreed, finding that prior salary does not constitute a factor other than sex and explained that prior salary does not fit within the catchall exception because it is not a legitimate measure of work experience, ability, performance, or any other job-related quality. The Court also recognized that permitting employers to consider prior salary “may well operate to perpetuate the wage disparities prohibited under the Act.”
Rizo v. Yovino clarifies that under the Equal Pay Act, pay history cannot be used to set compensation. Note, Oregon’s Equal Pay Law already prohibits employers from seeking the pay history of an applicant or employee before an employer makes an offer of employment that includes an amount of compensation. And, beginning in January 2019, it will be an unlawful employment practice in Oregon for employers to screen job applicants based on current or past compensation, or to determine compensation for a position based on past compensation of a prospective employee.
Bottom line: employers need to eliminate consideration of a prospective employee’s prior compensation when setting salaries and wages, and to the extent existing employees are paid differently based on prior salary or wages, employers need to consider whether that results in pay disparity between male and female employees (and correct the disparity).
Rizo v. Yovino No. 16-15372 (Apr. 9, 2018).