Hunton Employment & Labor Perspectives

Under California law, an employee’s prior salary cannot be used to justify a pay disparity.  Now, the same is true under federal law – at least in the Ninth Circuit.

In Rizo v. Yovino, the Ninth Circuit recently ruled that an employee’s prior pay history is not a “factor other than sex” that can justify a pay gap under the Federal Equal Pay Act (“EPA”).  This outcome may not surprise employers in California, where state law expressly prohibits using prior salary as a basis for a pay disparity.  But unlike California’s statute, the federal law does not directly prohibit consideration of prior pay.  Rather, the Ninth Circuit looked beyond the plain language of the statute and examined the purpose of the “catch-all” exception, which permits pay differentials based on “any factor other than sex.” The Court concluded that this broadly worded exception “comprises only job-related factors.”

In so ruling, the Ninth Circuit joins the Second, Fourth, and Tenth Circuits, which have held that only job-related factors can justify pay gaps under the EPA.  The decisions in these circuits also align with the growing number of states, counties, and cities that have passed “salary history bans”—laws that, to varying degrees, prevent employers from asking about or considering an employee’s prior pay.

But in other parts of the country, prior pay remains fair game.  The Seventh Circuit has read the catch-all exception more literally, concluding that the exception “embraces an almost limitless number of factors, so long as they do not involve sex,” and the Eighth Circuit has adopted a case-by-case approach with a focus on preserving “business freedoms.”

This circuit split may eventually be taken up by the Supreme Court, which will have to consider the trend toward banning pay history, on the one hand, and the plain language of the statute, on the other.