Earlier this month, the Ninth Circuit Court of Appeals decided an important case that has far-reaching, and positive, implications for ensuring that women are paid the same as men. In Rizo v. Yovino, the Ninth Circuit ruled, for the first time, that employers may not consider previous salary history when deciding whether a gender wage disparity is permissible.
The United States has had an Equal Pay Act (EPA) for 50 years. It mandates that men and women receive equal pay for equal work. Specifically, it prohibits any sex-based wage discrimination “between men and women in the same establishment who perform jobs that require substantially equal skill, effort, and responsibility under similar working conditions.”
The issue in this case is related to what is usually known as the gender pay gap, which typically refers to the gap between gender and racial population averages across all jobs, rather than what women earn versus men at the same workplace in the same job. For example, generally white women make roughly 80 cents for every dollar a white man earns. It’s much worse for Latina women, who earn as little as 42 cents when compared to every dollar earned by white men, and Black women, who make about 67 cents on the dollar against white men. However, the EPA deals specifically with men and women who work in the same place in roughly the same position requiring roughly the same skills. Functionally, it addresses a microcosm of the overall gender pay gap.
There are several exceptions to the EPA’s mandate of equal pay. A company can pay different wages under a seniority or merit system, a compensation scheme based on production levels, or on a differential “based on any other factor other than sex.” It’s that catchall exception that was at issue here.
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In Rizo, the plaintiff, Aileen Rizo, began work as a math consultant in California at the Fresno County Office of Education in 2009. Before working there, she had worked as a math teacher in Arizona. The County’s hiring schedule set the salary of new hires based on their prior salary: It added 5 percent to the prior salary and placed the new hire on the appropriate step of the salary schedule based on that.
After talking with male colleagues that were doing the same work for the county as she was, Rizo learned that her male colleagues had been hired at higher salary steps and were therefore earning more money than she was. In a step system, if you start on a lower step, you likely will never reach your colleagues who started on higher steps, as much of your procession up the steps is tied to the passage of time. In other words, it’s tough to leapfrog steps while you remain in the same job.
Rizo sued and alleged that the disparity in pay violated both the EPA and Title VII, which prohibits workplace discrimination based on sex.
The County admitted that Rizo was paid less than her male counterparts but explained that it was permissible because basing a starting salary on prior salary history was a “factor other than sex” under the EPA. With that in mind, the County moved for summary judgment at the district court level, arguing that the case should be dismissed and not proceed to trial. The lower court disagreed and held that “a pay structure based exclusively on prior wages is so inherently fraught with the risk—indeed, here, the virtual certainty—that it will perpetuate a discriminatory wage disparity between men and women that it cannot stand.”
The County appealed, and initially a three-judge panel of the Ninth Circuit agreed with the county based on a 1982 Ninth Circuit case, Kouba v. Allstate Insurance Company. That case had previously held that prior salary was a “factor other than sex” under the EPA. However, the Ninth Circuit then agreed to hear Rizo’s case en banc, meaning all judges on the court were present, rather than a panel of three. The appellate court then overturned both the panel decision and explicitly overruled Kouba.
One of the reasons the Ninth Circuit decided to overturn the Kouba decision was because of the very nature of the Equal Pay Act. It noted that the U.S. Supreme Court had called the act “broadly remedial.” What that means is that the EPA was designed to remedy the pernicious and long-standing problem of wage discrimination against women. If there are an abundance of loopholes that allow the wage gap to remain, the purpose of the EPA is swallowed by its own exceptions.
More specifically, the Ninth Circuit found that prior salary can’t be a factor in setting an employee’s current salary because nothing about one’s prior earnings is a “legitimate measure of work experience, ability, performance, or any other job-related quality.” Worse, given that women are routinely underpaid, basing current salaries on previous salaries simply serves to continue and exacerbate the wage gap at any given job.
This decision means that women living in Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington—the states that comprise the Ninth Circuit—will now no longer have their current salary based on their former salary. The Rizo decision explicitly says that consideration of prior salary is forbidden whether it is the only factor in setting a current salary or only one of many factors.
There’s a massive equal pay lawsuit currently in the mix that may be affected by this ruling. A California state court just issued an order finding that a group of female employees who have sued Google for pay discrimination may proceed with their class-action lawsuit. The women suing Google have alleged that Google pays women less than they pay men in jobs that are substantially similar. The lawsuit covers a wide variety of jobs at Google, including everything from software engineers to sales associates to preschool teachers. It alleges that Google is in violation of the California Equal Pay Act, which is substantially similar to the federal EPA.
The lawsuit raises several issues about how Google pays its employees, but the one that is relevant here is that Google currently expressly considers a new hire’s prior salary when it sets compensation. When a new employee’s prior salary is at or less than Google’s baseline compensation for that same type of job. Google pays them Google’s baseline compensation. If the prior salary is higher, Google pays above its baseline compensation. Much like the case in Fresno County, Google organizes its salary scale via steps, which means that women that start at a lower step on the scale have little to no chance to catch up, wage-wise, to men that have started at a higher step.
Since Rizo sued under the federal version of the EPA, her case was decided at the federal level. Therefore, the Ninth Circuit opinion covers the federal courts and cases that arise under federal laws. That means the Rizo decision doesn’t necessarily control what the California state courts would rule in the Google case. But given that the federal EPA and the California EPA are broadly similar, it may very well have a positive effect.
The Trump administration recently rolled back Obama-era rules that would have provided greater wage transparency by requiring companies like Google to report salary gap information. This leaves the courts as one of a dwindling number of venues where women can pursue equal wages. The EPA is toothless if the underpayment of a woman in the past leads to her underpayment upon hire at a new job. Unfortunately, at this point, it looks like that will have to be fixed federal circuit by federal circuit.