In recent years, a number of states and municipalities have adopted measures that restrict employers’ ability to base a new hire’s starting salary on what they made in their prior job. In the past, it was common for applicants to be asked about their salary history when seeking new employment. A new decision from the U.S. Court of Appeals for the Federal Circuit demonstrates the dangers inherent in using this approach, even in the absence of legislation banning the practice.

In Boyer v. United States, the plaintiff was a pharmacist employed by a Veterans Affairs Medical Center in Alabama. She filed an Equal Pay Act (EPA) lawsuit alleging she was paid less than comparable male pharmacists. The VA defended the claim in part by stating that her salary was determined by what she made in her prior job. The plaintiff countered that if her prior job’s pay was impacted by sex discrimination, basing her salary on this amount perpetuated this bias. The federal Claims Court held that setting salaries based on prior pay was a factor other than sex under the EPA, and dismissed the suit.

On appeal, the Federal Circuit disagreed, remanding the case to the Court of Federal Claims. In its opinion, the court surveyed other federal appellate courts which have adopted varying positions on this issue. Some circuits say that prior pay is a factor other than sex under the EPA. The Ninth Circuit takes the position that prior pay can never be used as a basis for establishing pay. Other courts take a middle ground, finding prior pay as potentially reflecting bias due to sex depending on the circumstances. The Federal Circuit adopted this approach, requiring the employer to demonstrate some other basis for setting the salary in addition to prior pay.

This decision cautions employers about using prior pay as the sole means for determining the pay of new hires. A better approach would involve reviewing factors such as education, experience, and market conditions. Many companies have established salary bands for certain jobs, with pay differences within those bands based on clear business factors.

[View source.]