En banc 9th Circuit bars prior wage history as justification for pay discrepancies between sexes

In one of the last opinions written by the late Judge Stephen Reinhardt, the 9th U.S. Circuit Court of Appeals ruled Monday that employers may not pay women less than men who do commensurate work because of prior salary history.

An en banc panel ruled that a catchall exception in the Equal Pay Act that allows employers to justify pay discrepancies when they are not based on sex does not allow the consideration of an employee's salary in past jobs. In doing so, the court overturned its own decision from the 1980s and split with a 2005 decision from the 7th U.S. Circuit Court of Appeals.

The defendant in the case said it intends to appeal to the U.S. Supreme Court.

The federal legislation requires employers to provide commensurate compensation to workers of both sexes whose jobs are similar, but exempts pay scale policies based on seniority, merit, productivity and other "differential[s] based on any other factor other than sex."

"We conclude, unhesitatingly, that 'any other factor other than sex' is limited to legitimate, job-related factors such as a prospective employee's experience, educational background, ability, or prior job performance," wrote Reinhardt.

Reinhardt said that it was "inconceivable" Congress intended to exempt hiring practices based on the consideration of "long-existing 'endemic' sex-based wage disparities" by passing legislation intended to cure that very problem. Rizo v. Yovino, 2018 DJDAR 3122 (9th Cir. April 9, 2018)

His opinion, which was joined fully by five of his colleagues, was based extensively on a legislative history analysis of the bill and Supreme Court precedent established in Corning Glass Works v. Brennan, 417 U.S. 188, 195 (1974), which held that paying male night shift workers more than female day shift workers violated the Equal Pay Act.

Reinhardt wrote that the catchall provision's placement alongside disparity exemptions for seniority, merit and productivity indicated that it was supposed to pertain to job-related reasons as well.

The defendant in the case, the Fresno County Office of Education, said that it "respectfully" disagreed with the court's analysis and intended to petition for Supreme Court review of the ruling.

"We remain confident that the policy of determining salaries by the Fresno County Superintendent of Schools (FCSS), which was in effect through December 31, 2015, was absolutely gender-neutral, objective and effective in attracting qualified applicants and complied with all applicable laws," the county said in a statement provided by its lawyer, Michael G. Woods, of counsel at McCormick, Barstow, Sheppard, Wayte & Carruth LLP.

The county further said that the policy in question applied to more than 3,000 employees over a 17-year period and claimed that it had "no disparate impact on female employees, who make up the majority of FCSS employees and its senior administrative staff."

Shay Dvoretzky, a partner at Jones Day in Washington, D.C. who argued the case before the 9th Circuit, referred a request for comment to Woods.

The lawsuit before the court concerned a Fresno school district math consultant, Aileen Rizo, who was hired under the county's pay framework, which took into consideration prior salary. Shortly after starting work, Rizo learned that male coworkers who had been hired subsequent to her received a higher salary. After unsuccessfully filing a complaint within the county, Rizo filed a federal lawsuit.

Fresno County unsuccessfully sought summary judgment before a magistrate judge in the Eastern District. Last year, a three-judge panel of the 9th Circuit vacated the decision not to grant summary judgment and remanded it to the trial court. Rizo then petitioned for en banc rehearing.

Daniel M. Siegel, a partner at Siegel, Yee & Brunner who represented Rizo before the 9th Circuit, said that the decision was the "correct ruling" and was "important to clarify the law on this issue."

"If the Supreme Court wants to take up the case, we're happy to argue it," he said, noting that his petition for en banc rehearing rested on the high court's decision in Corning.

Jessica Stender, who is senior counsel at Equal Rights Advocates and argued before the circuit on behalf of numerous amici in the case, noted that Reinhardt's discussion about intent in the opinion was important.

Reinhardt wrote that the Equal Pay Act does not require a showing of an intent to discriminate, unlike Title VII protection, which does.

"It's almost a strict liability law," Stender said, adding that the burden to show that disparate pay is supported by an acceptable exception turns to the employer "once a worker shows that he or she is being paid less for equal work."

Reinhardt's opinion garnered several separate concurrences by judges who agreed with the ruling's result but not with its reasoning.

Circuit Judge M. Margaret McKeown, joined by Circuit Judge Mary H. Murguia, agreed with most of the majority's opinion, but said that employers should be able to consider prior pay in addition to other factors when setting initial wages. She cited similar rulings from the 8th, 10th and 11th U.S. Circuit Courts of Appeals, which split the difference between the 9th Circuit's new ruling and the 7th Circuit's contrary precedent.

Circuit Judge Consuelo M. Callahan, joined by Senior Circuit Judge Richard C. Tallman, wrote a separate concurrence objecting to several of the majority's conclusions, including its holding that prior salary is job-related and that it inherently reflects gender-based wage discrepancies.

Both McKeown and Callahan pointed to the Equal Employment Opportunity Commission's position in the case that an employer could not justify disparity because of prior salary history alone, but could include it in a mix of considerations as a reasonable position. The two judges also expressed concern that the categorical bar on considering prior salary could chill voluntary discussions of such history in individual salary negotiations. Reinhardt, asserting that his opinion created a general rule, countered their conclusion in a footnote.

Circuit Judge Paul J. Watford wrote a separate concurrence advocating that a court should consider whether the prior salary was itself "tainted by sex discrimination" before finding an Equal Pay Act violation.

The California Legislature in recent years has passed laws that prohibit employers from asking prospective job candidates about prior salaries. It has also passed legislation amending the state's Fair Pay Act to say that prior salary by itself cannot justify a wage differential.