When is Unequal Pay Not a Violation of the Equal Pay Act?
The Equal Pay Act of 1963 prohibits sex discrimination in pay for completing the same work. An employer has multiple statutory defenses at its disposal, including that the differential is “based on any other factor other than sex.”
The recent Ninth Circuit Court of Appeals decision in Rizo v. Yovino put this affirmative defense to the test under circumstances that employers may commonly experience. The employer relied on a schedule to determine the starting salaries of its employees. To determine a new employee’s salary, the employer looked at the employee’s most recent prior salary and put the employee on that step of the employer’s schedule plus 5%. The employer and female employee agreed that she was paid less than her male counterparts for the same work. The employer argued, however, that her salary was based on the schedule, which was a factor other than sex.
The Ninth Circuit agreed with the employer in finding the defense applied to the plaintiff’s Equal Pay Act claim and the employer’s use of the schedule. The Ninth Circuit cited its prior precedent that held if an employer relies on prior salary to determine compensation, then the employer must show its use of prior salary was reasonable and effectuated some business policy. In Rizo, the court credited four business policies cited by the employer in relying on the schedule: (1) it is objective; (2) it encourages employee mobility; (3) it prevents favoritism; and it is a judicious use of taxpayer dollars. The court concluded that under these facts the district court erred in denying the employer’s motion for summary judgment.
As mentioned above, this case comes from the Ninth Circuit Court of Appeals which is the federal appellate court for Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington. Despite the geographic distinction, it is significant to Wisconsin because the opinion was written by Judge Lynn Adelman. Judge Adelman is one of the judges for Eastern District of Wisconsin, the lower federal court, but was sitting by designation on the Ninth Circuit for this decision and wrote the Ninth Circuit’s opinion. Indeed, the opinion is similar to the decision of the Seventh Circuit Court of Appeals on the same issue in Wernsing v. Dept. of Human Servs., State of Ill. However, the Seventh Circuit does not require employers to demonstrate that the policy is reasonable and effectuates some business policy as the Ninth Circuit requires.
This case is also notable because of an increase in legislative activity concerning whether individuals should reveal prior salary history when seeking new employment. Last September, a bill introduced in the House of Representatives would prohibit employers from asking about salary history with employees or applicants. Closer to home in Wisconsin, similar legislation has been introduced in the Assembly and Senate. If ever signed into law, these measures could have a significant impact on a defense that has served employers well in the past.