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Circuit court divide widens in salary discrimination issue

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An appellate court ruling that says prior salary alone should not be used to justify paying women less than men further develops a split among circuit courts on this issue.

But drawing any conclusions as to the ruling’s significance may be premature because it is still unknown how the lower court will respond to the appellate court’s instructions in remanding the case, experts say.

In its April 27 ruling, the 9th Circuit Court of Appeals in San Francisco overturned a lower court ruling that denied a defendant employer’s motion for summary judgment in Aileen Rizo v. Jim Yovino, Fresno County Superintendent of Schools.

Ms. Rizo, who was hired in 2009 as a math consultant for the Fresno County, California, schools learned in 2012 that a recently hired male math consultant, as well as all other math consultants, all of whom were male, were paid more than she was. She filed a lawsuit in the U.S. District Court in Fresno under the Equal Pay Act of 1963, Title VII of the Civil rights Act of 1964 and state law.

The Equal Pay Act states that among the factors permitting wage disparity is that a differential is based “on any other factor other than sex,” said the ruling. The defendant sought to establish this was the case by showing its pay structure was based on employees’ prior salaries, the ruling said.

“The District Court determined that, under the Equal Pay Act, prior salary alone can never qualify as a factor other than sex,” the ruling said.

The 9th Circuit ruling suggested the process is more complicated. It is “up to the employer to persuade the trier of fact that its stated ‘factor other than sex’ actually caused the salary differential, that the stated factor ‘effectuate(s) some business policy’ and that the employer used the factor ‘reasonably in light of (its) stated purpose as well as its other practices,’ ” said the panel, in quoting a 1982 9th Circuit ruling, and remanding the case for further proceedings.

"The 9th Circuit has already said that prior salary alone cannot be the determining factor in a salary differential, that there has to be a business justification for using the prior salary as the basis,” said Kimberly F. Seten, a partner with Constangy, Brooks, Smith & Prophete L.L.P. in Kansas City, Missouri.

“The District Court just kind of took that down to, you can never use prior salary” as a factor other than sex, she said.

“The burden is now on the employer in this case” to show that a factor other than sex caused the pay differential. We haven’t heard the end of this case,” said David B. Wilson, a partner with Hirsch Roberts Weinstein L.L.P. in Boston.

“Asking any applicant about their prior salary is a good negotiating tool for employers, and I’m pretty sure that most employers don’t ask that question with discriminatory intent,” said Eric B. Meyer, a partner with Dilworth Paxson L.L.P. in Philadelphia. “Rather, they ask it to negotiate a reasonable, but not overly generous, salary for a new hire. 

“The decision essentially keeps this tool in the employer’s arsenal as long as the employer is not using it with the intent to discriminate.  It’s a good decision for employers,” Mr. Meyer said.

Tracy A. Thomas, a professor at the University of Akron School of Law, however, said the decision was “very dated.”

“It just seemed like it was the early 1980s again,” she said, noting the ruling cited a 1982 case, Kouba v. Allstate Ins. Co., in its decision.

She added, however, “There may be a way to get at why this salary history is different at remand,” if the plaintiffs can frame the case that way.

Observers point out there has been a split in the Equal Pay Act’s interpretation among circuit courts. The Rizo ruling, for instance, cites cases by the 10th U.S. Circuit Court of Appeals in Denver and by the 11th U.S. Circuit Court of Appeals in Atlanta that agree with the District Court ruling that prior salary alone cannot justify a pay disparity.

A circuit split means the issue conceivably can come before the U.S. Supreme Court. However in this case, “I think it’s more likely that we’ll (first) see what the lower court does with the instructions that were provided by the 9th Circuit as to how to apply the law to the facts, and what to look for in determining whether there was a violation of the Equal Pay Act,” said Mr. Meyer.