The U.S. Ninth Circuit Court of Appeals has issued an opinion this week that will not only impact how courts nationwide evaluate pay discrimination claims, but also may require employers to re-evaluate their hiring and recruiting procedures. On April 9, 2018, the Court ruled en banc that prior salary—either alone or in combination with other factors—cannot justify a wage differential between men and women. The Court’s decision overturned its own precedent from last year, when a Ninth Circuit panel held that past salary is a “factor other than sex” that employers may use to justify gender pay gaps under the federal Equal Pay Act.
The Equal Pay Act bars compensating men and women differently for the same work, with four exceptions: based on seniority, merit, the quantity or quality of the employee’s work, or “any other factor other than sex” (the so-called “catchall” exception). In the past, some employers have defended Equal Pay Act claims by arguing that pay disparities were the product of market conditions, including employees’ salaries with previous employers.
However, the en banc Court held that an employee’s prior salary does not constitute a “factor other than sex” within the “catchall” exception. The Court concluded that “any other factor other than sex” is limited to legitimate, job-related items such as a prospective employee’s experience, educational background, ability, or prior job performance.
The Ninth’s Circuit’s decision reinforces a circuit split on the issue. The Tenth and Eleventh Circuits have held that prior pay alone cannot justify wage disparity (though it can be considered with other non-discriminatory factors). The Seventh and Eighth Circuits have found the opposite, holding that pay differentials based upon salary history do not violate the Equal Pay Act. With the growing focus on equal pay laws, this circuit split could ultimately reach the U.S. Supreme Court.
The Ninth Circuit’s decision also mirrors a national trend among states and locales. Several states and territories in recent years — including California, New York, New Jersey, Delaware, Massachusetts, Oregon and Puerto Rico — have prohibited employers from asking prospective employees about their salary history. Several large cities have enacted similar laws, including New York City, San Francisco, Pittsburgh, Philadelphia, and New Orleans.
Given all of the above, employers should stay closely tuned to the quickly-changing legal landscape involving equal pay. Employers with employees located in jurisdictions that have already outlawed consideration of salary history may need to immediately change their hiring procedures and instruct hiring personnel accordingly. Meanwhile, employers outside the reach of such laws should watch closely for further case law and legislative developments.
