Ninth Circuit: Prior Pay Rate Not a Defense to Unequal Pay

By James Korte

On February 27, 2020, the United States Court of Appeals for the Ninth Circuit issued its opinion in Rizo v. Yovino, No. 16-15372 (9th Cir. Feb. 27, 2020) (Rizo II). The Ninth Circuit ruled that “factors other than sex,” an affirmative defense to the Equal Pay Act (EPA), include only job-related factors, not past pay history. This is the second opinion issued by the Ninth Circuit in the same case. The Supreme Court vacated the original opinion because the author of the majority opinion died prior to the issuance of the decision. See generally Yovino v. Rizo, 139 S. Ct. 706 (2019) (vacating and remanding Rizo v. Yovino, 887 F.3d 453 (9th Cir. 2018).

In this case, the defendant’s pay system set pay for new employees based entirely on the employee’s prior rate of pay. For example, to calculate a new employee’s pay, the defendant began with the employee’s prior wages, increased the wages by 5 percent, and placed the employee at the corresponding step on its pay schedule. This policy was applied equally to both males and females, but it resulted in pay disparities if new employees were paid more at their previous jobs, for any reason.

The defendant argued that the fourth defense to the EPA, reliance on “factors other than sex,” allows an employer to use any factor that is not sex itself, including the prior rate of pay. Rizo II at slip. op. 1. The Ninth Circuit rejected this argument, holding instead that the defense is limited to “job-related” factors. Ultimately, the Court ruled that the plaintiff’s prior rate of pay was not “related” to the new job; thus, the defendant could not rely on prior pay to justify paying the plaintiff less than male employees who performed the same work. The Court highlighted that to allow prior pay to be used as a defense to EPA claims would permit employers to capitalize on the historical pay disparities experienced by women.

Employers with operations in the Ninth Circuit—Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington—should revisit their compensation policies and eliminate any consideration of pay in other jobs. Be aware also of state laws that might preclude even discussing prior pay with prospective employees.