9th Circuit Holds Prior Salaries Can Not Be Basis For Pay Differentials Between Male and Female Employees

in Employment Law by

The 9th Circuit decided in Rizo v. Yovino, 2018 U.S. App. LEXIS 8882, that prior salaries are not “factors other than sex” to justify a pay differential between men and women. In Rizo v. Yovino, The Court, en banc, addressed the application of “prior salaries” as applied to the Equal Pay Act. The plaintiff in Rizo was a female who claimed she was paid less than her similarly situated male colleagues. Plaintiff sued under the Equal Pay Act, which prohibits sex-based wage discrimination. The Equal Pay Act allows wage differences in four circumstances: 1) a seniority system; 2) a merit system; 3) a system which measures earnings by quantity or quality of production; or 4) a differential based on any other factor other than sex. Defendant employer had a policy of determining salaries based on the employee’s previous salary. It argued that its policy of relying on prior salaries to determine its employees’ current salaries, was a valid defense because it was based on a factor “other than sex.” The employer moved for summary judgment.

The 9th Circuit’s majority opinion, en banc, with three concurring opinions, affirmed the district court’s denial of summary judgment, holding that prior salaries, either alone or in combination with other factors, cannot be used to justify pay differences between men and women. The Court applied two statutory interpretation cannons—noscitur a sociis, “a word is known by the company it keeps,” and ejusdem generis, interpreting general terms at the end of a list of more specific ones— and determined that prior salary does not fit within the fourth catchall exception of “any other factor other than sex” because it is not a legitimate measure of work experience, ability, performance, or any other job-related quality. The Court also believed that relying on prior salary would perpetuate wage disparities. In doing so, the Court abrogated its previous holding in Kouba v. Allstate Insurance Co., 691 F.2d 873 (9th Cir. 1982).

While Rizo is well-intentioned, it takes a hardline approach that limits possible defenses for pay differentials. As the concurrences note, sex-based discrimination is wrong, but the majority opinion refuses to acknowledge legitimate and non-discriminatory reasons for different prior salaries, including costs of living differences and the different supply and demand levels for different jobs. Rizo’s application may be limited in California, as AB168 bans employers from asking job applicants about their prior salary. However, this case seems ripe for Supreme Court review as both the 7th and 8th Circuits have taken broader approaches as to what constitutes “factors other than sex.”