Salary History is No Longer Justification for Pay Inequality

Katz Banks Kumin partners Debra Katz and Avi Kumin were quoted in articles for the Associated Press, Law360, and SHRM about the Ninth Circuit’s ruling that a worker’s past compensation can no longer serve as justification for paying women less than men.

The 11-judge panel of the Ninth Circuit Court ruled that an employer illegally discriminated against plaintiff Aileen Rizo, a California math consultant, by paying her thousands of dollars less than her male counterparts due to the employer’s practice of paying employees based on previous salaries.

Under the Equal Pay Act, Employers can differentiate salaries based on “any factor other than sex.” The issue at hand is whether previous pay – which may be affected by institutionalized inequality – is a factor “other than sex.”

Ms. Katz called the ruling an “extraordinary victory” for women, and expects that this decision will make it much harder for employers to discriminate in pay without suffering consequences.

“The Equal Pay Act’s exceptions for factors ‘other than sex’ is often used to just swallow up the whole law and provide an out for employers,” said Ms. Katz.

This ruling conflicts with prior opinions from other courts, such as the Seventh Circuit, holding that that previous pay is not a sex-based factor.

“What’s clear at this point is that there are different standards in different locations on whether employers can consider salary history,” said Mr. Kumin.

His advice for employers would be to train hiring managers and recruiters on what they can and cannot ask during interviews.

Until a potential ruling by the Supreme Court, the role of this factor on pay equality will depend on the locations of the employees and employers.

Find the full Associated Press article here, the Law360 piece here, and the SHRM article here.