Over the past several years, a number of states have passed or considered legislation that prohibits employers from using an applicant’s prior salary history when setting incoming pay rates. The legislation is based on a belief that this practice can perpetuate discriminatory salary practices put in place by the prior employer. Last week in an en banc decision, the full Ninth Circuit Court of Appeals reached the same conclusion, but this time using existing federal law to exclude use of salary history in hiring.
Rizo v. Yovino involved a new county employee whose salary was set in part based on her pay at a prior job. When she discovered that she was paid less than comparable male employees, she filed suit under the Equal Pay Act. However, a Ninth Circuit panel found that use of salary history qualified as “a factor other than sex” that could be used without violating the EPA. The plaintiff appealed this decision to the full Ninth Circuit.
In its decision, the court concluded that factors other than sex as defined under the EPA, are limited to legitimate job-related factors such as education, experience and prior job performance. Salary history might bear some rough relationship to these factors, but it can also perpetuate wage disparities. The Ninth Circuit read the text and legislative history of the EPA as directly intended to avoid this consequence.
For employers in the Ninth Circuit and other areas where courts may follow this reasoning, this decision has the same effect as state legislation intended to prevent use of salary history in hiring. Employers that continue to use this factor may be subject to federal claims for unfair pay based on gender. As a result of this controversy, many employers have already stopped asking applicants about their previous pay. While they may continue to solicit a requested salary from applicants, basing pay on prior compensation raises increasing risk of legal action.