Use of Past Salary Justification for Pay Disparity Says California Court
California’s Ninth Circuit reversed a district court ruling in Rizo v. Yovino that held that an employer violated the Equal Pay Act because of its bright-line policy rule of paying new employees 5% more than their prior salaries.
Equal Pay ActThe district court agreed with the Equal Employment Opportunity Commission (EEOC), finding that basing compensation on an applicant's prior compensation only furthers the wage gap between men and women, therefore, violating the Equal Pay Act. The Ninth Circuit disagreed and reversed.
The Equal Pay Act ("Act") prohibits sex-based wage discrimination between men and women in the same workplace who perform jobs that require substantially equal effort, responsibility, and skill under similar working conditions.
Penalties for an employer found to be engaging in discriminatory pay practices may include requirement to pay back wages, reinstatement or promotion of the individual, payment of future wages, monetary penalties, injunctive relief, and even imprisonment.
Case FactsThe case involved a female Fresno County public school employee who worked as a math consultant. Her prior salary was well below the average salary of other math consultants, even with the 5% increase, so she was paid on the low end of the pay range for the position. When the plaintiff discovered after being hired that certain male co workers, even those who were recent hires, were being paid significantly more than her at the time for the same work, she complained internally with the county. When the county defended the pay disparity, she filed a complaint with the EEOC under the Equal Pay Act.
The district court agreed the county's internal pay practice was discriminatory and violated the Equal Pay Act. The Ninth Circuit disagreed, it did not set out a bright-line rule but instead noted use of prior salary was acceptable if the employer can show it effectuated a business policy that was reasonable in light of its purpose and other practices. The state of California has its own strict rule that states prior salary alone cannot justify pay disparity.