Rizo v. Yovino, No. 16-15372 (9th Cir. Feb. 27, 2020) (en banc)

By Paul Mollica

On remand from the Supreme Court, the Ninth Circuit reaffirms its original en banc holding that a “factor other than sex” under the Equal Pay Act (29 U.S.C. §206(d)(1)) must be “job-related,” and thus rejects an employer’s use of pre-employment salary history as a reason to pay a woman less than a man doing the same work. The court once again overrules its prior decision on this subject, Kouba v. Allstate Ins. Co., 691 F.3d 873 (9th Cir. 1982).

Rizo v. Yovino, No. 16-15372 (9th Cir. Feb. 27, 2020) (en banc): The federal Equal Pay Act (EPA) of 1963 mandates that men and women be paid the same for work that “requires equal skill, effort, and responsibility, and which are performed under similar working conditions.” An employer can escape liability only by proving that the disparity is “pursuant to (i) a seniority system; (ii) a merit system; (iii) a system which measures earnings by quantity or quality of production; or (iv) a differential based on any other factor other than sex.”

For many years, employers have argued that they may consider an applicant’s prior, pre-employment salary history (“prior salary”) in setting a starting salary, and that this falls under the “catchall” category of “factor other than sex.” This argument gained purchase in some courts, and indeed was the law in the Ninth Circuit for decades. But today’s decision throws out the old Ninth Circuit law, brings the court in line with other circuits who have rejected prior salary as “any other factor other than sex,” and arguably goes beyond other courts by setting a bright-line rule barring use of that factor.

Rizo was hired as a math consultant by the Fresno County Office of Education in 2009 and discovered in 2012 that she was being paid less than her male peers. She brought suit under the EPA. The county defended that was following a gender-neutral Standard Operating Procedure (“SOP 1440”) in setting starting salaries, which began with “the employee’s prior wages, increased the wages by 5%, and placed the employee at the corresponding step on its pay schedule.”

The district court agreed with Rizo that her prior salary was not a valid factor other than sex under the EPA. But it allowed an interlocutory appeal of the issue to the Ninth Circuit, which at first reversed the district court by applying the prevailing 1982 authority, Kouba. The Ninth Circuit then ordered rehearing of the case en banc. The first en banc opinion, authored by the late Judge Stephen Reinhardt, Rizo v. Yovino, 887 F.3d 453 (9th Cir. 2018) (en banc), vacated and remanded, 139 S. Ct. 706 (2019) (per curiam), held that prior salary in another job was never a “factor other than sex.” (The Supreme Court vacated that decision, 9-0, because Judge Reinhardt died before the opinion was issued, thus invalidating his vote.)

Today, the en banc court again affirms the district court and overrules Kouba. Judge Christen – replacing the late Judge Reinhardt as author – writes for the majority of six judges. (Judge Watford, who originally filed his own concurring opinion, drops it this time in favor of fully joining the majority.) The majority concludes that “the text of the Act and canons of construction, and the EPA’s history and clear purpose, all point to the conclusion that the fourth exception [factors other than sex] is limited to job-related factors only.” Accordingly, “[p]rior pay-pay received for a different job-is necessarily not a factor related to the job for which an EPA plaintiff must demonstrate unequal pay for equal work.”

The majority bases its decision not only on the statutory language of the EPA, but the animating purpose of the law-to stop sex-based pay discrimination:

“The EPA’s fourth exception allows employers to justify wage disparities between employees of the opposite sex based on any job-related factor other than sex. Because prior pay may carry with it the effects of sex-based pay discrimination, and because sex-based pay discrimination was the precise target of the EPA, an employer may not rely on prior pay to meet its burden of showing that sex played no part in its pay decision. For purposes of the fourth exception, we conclude that the wage associated with an employee’s prior job does not qualify as a factor other than sex that can defeat a prima facie EPA claim.”

The majority finds further support in the other U.S. Courts of Appeals that require factors other than sex to be “job-related” and do not recognize prior pay as a factor. “Only the Seventh Circuit has conclusively relied on prior pay as an affirmative defense to a prima facie EPA claim.”

The majority stops short of declaring prior salary entirely irrelevant to pay decisions, noting that it is “not unusual for employers and prospective employees to discuss prior pay in the course of negotiating job offers, and the EPA does not prohibit this practice.” Nevertheless, if called upon to defend against a prima facie showing of sex-based wage discrimination, the employer must demonstrate that any wage differential was in fact justified by job-related factors other than sex. Prior pay, alone or in combination with other factors, cannot serve as a defense.”

Two concurring opinions for five judges would have also affirmed the district court, though they decline to adopt the full breadth of the majority’s reasoning and declare prior salary to be a possible factor.

Judge McKeown (joined by Judges Murguia and Tallman) would not agree with the bright-line rule that starting salary is a banned factor under the EPA. “Using prior salary along with valid job-related factors such as education, past performance and training may provide a lawful benchmark for starting salary in appropriate cases.”

Judge Callahan (joined by Judges Bea and Tallman) would hold that salary history is “not inherently a reflection of gender discrimination,” and that “differences in prior pay may also be based on other factors such as differences in the costs of living and in available resources in various parts of the country.” Nevertheless, these concurring judges agreed that making prior salary the “exclusive determinant of pay” was not valid under the EPA.