School’s Out! Ninth Circuit Holds Prior Salary of Teachers Can Justify Pay Differentials

As schools across the country prepare for summer break, the Ninth Circuit overturned a lower court decision against the Fresno County public school district which had found that its pay practices were unlawful. Notably, the Ninth Circuit held that an employer may rely on prior salary as an affirmative defense to claims under the federal Equal Pay Act (“EPA”) if “it show[s] that the factor ‘effectuate[s] some business policy’ and that the employer ‘use[s] the factor reasonably in light of the employer’s stated purpose as well as other practices.’”

In the case, plaintiff Aileen Rizo was employed as a math consultant with the in the school district. In 2012, she learned that a recently hired male math consultant was hired at a higher salary level than her.  She later discovered that the other male math consultants were also paid more than her.  When she complained to the County, it explained that all starting salaries were determined by the person’s most recent prior salary plus an automatic five percent increase.

Rizo alleged the policy constituted sex discrimination under the EPA, Title VII of the Civil Rights Act of 1964, and the California Fair Employment and Housing Act. While the County conceded that Rizo was in fact paid less than a male doing the same job,  it moved for summary judgment on the grounds that the pay differential was based on one of the affirmative defenses under the EPA,  a “factor other than sex,” i.e., her prior salary.  The County asserted four business reasons for following the standard operating procedure that relied on prior pay: (1) it was objective; (2) it encouraged candidates to leave their current jobs for employment with the County; (3) it prevented favoritism and encouraged consistency in its application; and (4) it was a “judicious use of taxpayer dollars.”  In denying the motion, though, the district court determined that prior pay does not qualify as a factor other than sex under the EPA because it perpetuates a discriminatory wage disparity between men and women.

On appeal, the Ninth Circuit reaffirmed its previous 1982 decision, Kouba v. Allstate, and held that an employer may rely on prior salary if “it showed that the factor ‘effectuate[s] some business policy’ and that the employer ‘use[s] the factor reasonably in light of the employer’s stated purpose as well as other practices.’”  As a result, the Ninth Circuit vacated the district court’s decision and remanded it for further proceedings.  In doing so, the Ninth Circuit emphasized that the employer bears the burden of persuasion when it comes to justifying a pay differential under one of the EPA’s four affirmative defenses.  Further, the Court explained that in order to establish a “factor other than sex” defense, an employer must persuade the factfinder that (1) its stated factor actually caused the pay differential; (2) its stated factor effectuates some business policy; and (3) it used the factor reasonably in light of its stated purpose and its other practices.  The Ninth Circuit also reiterated that while claims under the EPA do not require proof of discriminatory motive, a plaintiff may introduce evidence of pretext to rebut the employer’s affirmative defense.

The decision appears to conflict with rulings in other circuit courts of appeal that have rejected the use of prior pay as a defense to claims under the EPA. The Fifth, Tenth and Eleventh Circuits have rejected reliance on prior pay alone as a valid defense to an EPA claim. The Seventh and Eighth circuits have taken a position similar to that of the Ninth Circuit. The issue may be now be ripe for Supreme Court review.

In response to the decision, U.S. Rep. Eleanor Holmes Norton (D-D.C.) has introduced a bill known as the Pay Equity for All Act that would prohibit employers from using salary history in setting on-hire pay. The Act would also make it illegal for an employer to take adverse action against an employee or applicant who complains about being asked salary history questions.  Massachusetts, California, Philadelphia, and New York City have enacted similar legislation.

The case is Aileen Rizo v. Jim Yovino, case number 16-15372, in the U.S. Court of Appeals for the Ninth Circuit.