Court bars use of past wages to set pay
Prior salary can’t be cited to justify gender gaps in compensation, 9th Circuit panel says.
Aileen Rizo was sitting at a lunch table with other math consultants in 2012 when she learned that her employer had just hired a man with less experience and education at a higher salary.
Rizo, then a math consultant for the Fresno County Office of Education, said the new hire made $13,000 a year more than she did. When she asked management about the disparity, she was told her pay had been based on her prior salary. She sued.
On Monday, the U.S. 9th Circuit Court of Appeals decided unanimously in Rizo’s favor, ruling employers may not consider prior salaries in setting a person’s pay.
“I am just overjoyed,” Rizo, 43, said in an interview. “I have three daughters, and I know what I did will make the world a better place for them. I wanted to make a difference.”
The decision by an 11judge en banc panel overturned a three-judge panel’s decision last year against Rizo.
Written by Judge Stephen Reinhardt, who died late last month, Monday’s ruling said that allow-
ing employers to consider prior salaries in setting pay was “wholly inconsistent” with the federal Equal Pay Act, passed in 1963.
“The financial exploitation of working women embodied by the gender pay gap continues to be an embarrassing reality of our economy,” wrote Reinhardt, a President Carter appointee who was dubbed the liberal lion of the circuit courts. Women still earn less than men, and the gap costs women more than $860 billion a year, he said.
“If money talks, the message to women costs more than ‘just’ billions: women are told they are not worth as much as men,” Reinhardt wrote.
“Allowing prior salary to justify a wage differential perpetuates this message, entrenching in salary systems an obvious means of discrimination,” he said.
The federal Equal Pay Act bars wage disparity except in cases of seniority, merit, quantity or quality of production or “any other factor other than sex.”
The Fresno County Office of Education argued unsuccessfully that setting wages based on prior salaries came under the last exception for a factor “other than sex.”
Reinhardt said Monday’s decision amounted to a “general rule” and did not determine whether past salary may play a role in salary talks.
But several judges said in concurring opinions that the decision was overly broad.
Four complained that the majority had wrongly held that any consideration of prior pay was illegal, even when it involved job-related factors. A fifth said employers should be able to consider past salaries as long as they did not reflect sex discrimination.
In one of the concurrences, Judge M. Margaret McKeown, a President Clinton appointee, said she agreed that prior salaries may reflect historical sex discrimination.
“But the majority goes too far in holding that any consideration of prior pay is ‘impermissible’ under the Equal Pay Act, even when it is assessed with other jobrelated factors such as experience, education, past performance and training,” wrote McKeown, who was joined by Judge Mary H. Murguia, a President Obama appointee.
McKeown warned that Monday’s “drastic holding” might impose liability on employers who even consider prior salary in setting a wage.
“The Equal Pay Act should not be an impediment for employees seeking a brighter future and a higher salary at a new job,” she wrote.
Attorneys on both sides of the case said that the decision would prevent employers from considering prior pay in any context.
Michael Woods, an attorney for the Fresno County Superintendent of Schools, said the office plans to appeal to the U.S. Supreme Court.
The policy of basing pay on prior salaries applied to more than 3,000 employees over 17 years and had “no disparate impact on female employees,” who make up a majority of staff and senior administrators in the county office, Woods said.
The Fresno office stopped considering prior salary in 2016 in response to changes in California law, which now says prior pay cannot be used to justify disparity in earnings.
Kevin Brunner, Rizo’s lawyer, called the decision “the exact precedent we were trying to set.”
“If you could use prior pay, you could never close the gender gap,” Brunner said.
Monday’s decision applies to nine Western states. California’s pay law, amended in part because of the Rizo case, says pay differences based on race, sex or ethnicity may not be justified solely by prior salary.
Laurence Zakson, who represented guilds for makeup artists, hairstylists and costume designers as well as a public employee union, said Monday’s ruling was important because the wage protections now extend beyond California.
“My clients are extraordinarily pleased and think this is a major step forward toward getting the pay gap remedied,” Zakson said.
Rizo, who is now a candidate for state Assembly, testified in Sacramento in favor of the recent changes to California’s equal pay law.
Once the new state requirements took effect in 2016, she and other women working in the Fresno office received pay raises, though they were not retroactive, Rizo said.
“For the last six months [at the office], I finally did get equal pay for equal work,” she said.
Basing pay on prior salary hurts many women, including those who take time off work to have or raise children, she said.
Her lawsuit created tensions at work, and she always felt like “the elephant in the room,” she said. She resigned in 2016 and now works as a math researcher for a nonprofit organization.
The timing of the 9th Circuit decision “couldn’t be better,” she said. Tuesday is national Equal Pay Day.