The Ninth Circuit’s ruling in Rizo suggests employers can pay women less than men for the same job based on prior salary
In April, the Ninth Circuit held in Rizo v. Yovino1 that prior salary could be used to justify differences in compensation as a “factor other than sex” if the use of prior salary is reasonable and supports a business policy without running afoul of the Equal Pay Act. Aileen Rizo moved from Arizona to California as a math consultant. She was one of four math consultants in the public schools in Fresno County. After some time working there, she discovered, in the course of a conversation, she was paid considerably less than a male colleague. In fact, she subsequently discovered she was paid less than all of her male colleagues. This suit ensued. The Ninth Circuit stated that the district court must evaluate the business reasons given by the County and determine whether it used prior salary “reasonably in light of [its] stated purpose[s] as well as its other practices.”2
The Ninth Circuit used Kouba v. Allstate3 as precedent. In Kouba, the Ninth Circuit held that an employer may prove that paying women less is not based on sex but on a business factor. Allstate claimed that the use of prior salary is “a factor other than sex” within the meaning of the statutory exception; however, Kouba argued that the use of prior salary caused a wage differential that constituted unlawful sex discrimination.4 In Kouba, the Ninth Circuit created a roadmap to guide the lower court in evaluating Allstate’s reasonableness in effectuating factors other than sex through the wage differential. In providing the roadmap, the Court recognized the pretextual nature of “other business factors”5 that could be used to circumvent the Equal Pay Act and permit discriminatory practices. However, the Ninth Circuit noted that courts have limited ability to protect against such abuse because the Equal Pay Act entrusts employers, not judges, with determining how to accomplish business objectives.6 The Court noted that the Equal Pay Act does not prohibit the use of prior salary. Furthermore, the Court noted that although there exists the fear that an employer might manipulate its use of prior salary to underpay female employees, a court must first find that the business reasons given by an employer do not reasonably explain its use of prior salary before finding a violation of the Equal Pay Act.7
What Lies Ahead?
With division among the circuit courts on this issue, perhaps it is ripe for a Supreme Court ruling. Some jurisdictions are not waiting, including Massachusetts, Philadelphia, and New York City. All three ban salary history requests by employers.
Additionally, Allstate settled Kouba’s claim in a class action matter in 1984, nine years after she filed suit, for $5M. The class included 3,100 women who were either current or former Allstate employees.8
It would not be shocking for the Rizo case to end in a settlement, particularly since some California cities are also considering a salary history ban. In fact, at the federal level, Representative Eleanor Holmes Norton (D.C.) has introduced the Pay Equity for All Act that would prohibit employers from asking for salary history prior to making a job or salary offer.9