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What Employees Should Know in the Wake of the 9th Circuit Pay History Ruling

Employers have the right to pay a man more than a woman for the same work if he had a higher salary at a previous job and there is a "reasonable policy" that justifies the company using past salaries to determine compensation. This was an opinion issued in April by the 9th Circuit in Rizo v. Yovino - a decision that threatens to severely undermine this country's progress on pay equity.

9th Circuit: Business Reasons Can Override Pay Equity Laws

Plaintiff Aileen Rizo, a math consultant in California's Fresno County School District, was hired in 2009 at a starting salary of $62,733. This was more than what she'd been paid as a schoolteacher in Arizona, but at the lowest end of the pay scale for her new position. In 2012, while at lunch with colleagues, Rizo learned from a male math consultant who had recently been hired that he was being paid about $12,000 more than Rizo, who by then was in her fourth year on the job. The colleague, who was paid more, had less experience and education than Rizo. Rizo eventually learned that every other male math consultant also earned more than she did.

Rizo sued under the federal Equal Pay Act. The county moved to dismiss the case, but the trial court denied the motion. The county then appealed to the U.S. Court of Appeals for the 9th Circuit, arguing that its use of previous salaries to determine current compensation justified the pay disparity between Rizo and her male counterparts.

The 9th Circuit panel agreed, vacating the lower court's denial. In support of its ruling, the 9th Circuit relied on Kouba v. Allstate Insurance Co., a 1982 decision. In that case, the 9th Circuit found that past salaries can be considered "a factor other than sex" under the Equal Pay Act if the employer adequately demonstrates it will "effectuate some business policy" and is done "reasonably." The appellate court then remanded the case back to the trial court to develop the record, including the school district's business reasons for the pay disparity.

A Divisive Decision That Sanctions Using Salary History to Discriminate

The 9th Circuit's ruling in Rizo places it squarely in opposition with other federal appeals courts as well as several states and cities. This split could lead to Supreme Court review.

The 10th, 11th, and 5th Circuits have all previously found that the Equal Pay Act prohibits using salary history to justify paying women less than men for the same work. California, Massachusetts, New York, Washington, D.C., and Philadelphia have also banned employers from asking about someone's salary history.

Using salary history to determine present compensation is discriminatory and harmful - and can cost someone hundreds of thousands of dollars over the course of a career. The practice also prevents society at large from addressing the structural problem of pay inequity. While this is an issue women often face in the workplace, it can also affect other groups - including men.

For example, employees who are new to the workforce or change careers during a recession, when pay might be lower across the board, will be at a distinct disadvantage if their salary histories are used to determine compensation. Others may not take the time or be able to learn the salary range in their industries and, therefore, not know they should be paid more.

If an employee has consistently received below-average compensation, that trend will continue if future employers rely on salary history to determine pay. The employee will never achieve parity with his or her peers - an insidious practice with serious consequences.

Be Prepared: What Employees Can Do

As seen with Rizo, even with pay equity laws on the books, many employers will push a "business case" for using salary history in determining compensation. Depending on where the company is located, they may or may not have the support of the courts to do so. Those in the 9th Circuit's jurisdiction, for example, appear to be able to offer that defense.

With some employers reluctant to change this practice, it is up to employees to push back. There are several ways to do this:

Knowledge is Power. Perhaps it is time to retire the taboo against talking about compensation among co-workers. As Aileen Rizo discovered, often the only way employees find out they are not being paid the same as their colleagues is to ask. If this information were to be openly shared among employees, it would bring the issue into the light and force employers to be accountable for their decisions. Massachusetts and other states have enacted laws that protect employees from retaliation by employers for inquiring into, discussing, or disclosing information about their own or another's compensation.

Reframe Questions about Salary History. When filling out applications or during job interviews, prospective employees should be careful when answering questions about salary history. If the question is not asked, do not volunteer the information.

When asked directly, think about reframing the question so that the reply focuses on an expected salary range. If pushed, an applicant might say previous employers insist on keeping that sort of information confidential, and then bridge back to the expected range answer. It may not work in every case, but it could help in many.

Talk to Legal Counsel. There are many ways in which an experienced employment lawyer can help with addressing pay disparity caused by companies basing compensation on salary history.

First, an employment lawyer can provide information on what an employer can and cannot ask during an interview. Second, the attorney may have research showing compensation trends for a particular industry. Third, if an employee finds out he or she is being paid well below colleagues, there are options that an employment lawyer can outline in confidence. Sometimes just one brainstorming meeting with an experienced third party can reveal several pathways to negotiating a salary that doesn't perpetuate inequality.

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