Court: Employers Can Pay Women Less Than Men Based on Their Past Salaries

by | April 28, 2017

By Bob Egelko

An employer can pay a woman less than a man for the same work if the man was paid more at his previous job and if the employer had a reasonable policy to justify reliance on past salaries, a federal appeals court ruled Thursday.

Basing wages on an employee's previous pay level does not violate federal laws against sex discrimination, even though it may have the effect of maintaining a wage gap between men and women, said the Ninth U.S. Circuit Court of Appeals in San Francisco. The same policy could also be used to pay women more than men, if a woman's past salary was higher.

The ruling, in a case from Fresno County, did not mention a new California law that prohibits paying different wages to men and women with equal qualifications by relying on their previous pay levels. The law took effect in January, and state courts have not yet considered whether it would apply retroactively to cases like this one.

The case involves Aileen Rizo, who had worked as a schoolteacher in Arizona for 13 years before being hired by the Fresno County schools in 2009 as a consultant for math teachers in the county. She was paid $62,733, nearly $10,000 more than her previous salary in Arizona but near the bottom of the pay scale for her new job.

In 2012, Rizo said, a man who had just been hired for the same job told her he was being paid about $79,000 a year. When she learned that the other consultants, also male, were paid more than she was, she complained to county officials, who said the differences were based on the employees' salaries at their most recent jobs, plus a guaranteed raise of at least 5 percent.

When Rizo sued, lawyers for the county offered several justifications for their policy: It was based on objective facts, it was applied consistently and without favoritism, and the minimum 5 percent raise would encourage candidates to apply for employment. The county also said some of its female employees had benefited from the policy.

A federal magistrate rejected those arguments and ruled that unequal pay for men and women, based entirely on past salaries, amounted to sex discrimination. The appeals court overturned that ruling and said Thursday that the magistrate should decide whether the county's justifications were reasonable business practices.

The federal Equal Pay Act allows differential pay based on "a factor other than sex," and an employee's past salary can fall into that category when it serves the employer's business purposes, the court said in a 3-0 ruling by Lynn Adelman, a federal judge from Wisconsin temporarily assigned to the court. He said the same conclusion had been reached by the Ninth Circuit in a 1982 ruling, whose meaning was contested in Rizo's case.

Two other federal appeals courts have interpreted the same law to mean that reliance alone on prior salaries is banned, clearing the way for a possible Supreme Court appeal to resolve the conflict. The U.S. Equal Employment Opportunity Commission has sided with Rizo in the case.

In anticipation of the new California law, Fresno County changed its salary practices and now pays Rizo as much as her male colleagues, said the county's lawyer, Michael Woods.

(c)2017 the San Francisco Chronicle