(Reuters) - On Tuesday, the 9th U.S. Circuit Court of Appeals agreed to reconsider a surprisingly long-lived question: Given systemic evidence that women are paid less than men for doing the exact same work, does gender bias inevitably taint pay scales based on salary history? 9th Circuit precedent from 1982 says the answer is no, but the court’s grant of en banc review in Rizo v. Yovino suggests that decades-old holding could be in for rethinking.
Even if the 9th Circuit changes its mind, though, the federal circuits will still be split on whether it’s okay to perpetuate and even amplify wage disparities via salary systems based on previous pay. Congress passed the Equal Pay Act in 1963. More than a half-century later, courts are still trying to figure out how to interpret it.
Here’s the backstory in the Rizo case. Aileen Rizo was hired in 2009 as a math consultant in Fresno County, California. Her pay was set under the county school system’s standard salary guidelines, which grant new employees a 5 percent bump from their previous salary, plus a bonus for a master’s degree. Rizo, who joined the Fresno system from a job in Phoenix, earned the minimum starting pay for a Fresno educator at her level, $62,733.
In 2012, Rizo was having lunch with a newly-hired colleague in the math department who told her his starting pay was several notches higher than hers on the Fresno scale. When Rizo poked around, she found out that two other colleagues in the math department had also started at pay grades higher than hers. All three of Rizo’s co-workers were all were earning thousands of dollars a year more than she was. They were also all men.
Rizo complained. The Fresno school told her the pay gap was not the result of bias against women, but of its objective, gender-blind policy of basing starting salaries on employees’ previous pay. After investigating, the school board told Rizo that over the past 25 years, its policy had actually benefited women, who often ended up higher on the pay scale than men with comparable jobs. In fact, another woman who was hired as a math consultant – the same job as Rizo - in 2012 entered the system at a higher grade than at least one of Rizo’s male colleagues.
Rizo nevertheless sued the school system for violating the Equal Pay Act, which says employers cannot pay men and women different wages for doing the same job. The school system moved for summary judgment, arguing that the salary gap between Rizo and her male co-workers was not due to sex discrimination. Under the Equal Pay Act, employers can rebut evidence of disparate pay by affirmatively proving wage differences are attributable to gender-neutral policies. (Courts have adopted the phrase “factors other than sex,” to define this catch-all exemption.) Here, Fresno said Rizo’s lower starting salary was solely the result of the school system’s policy of setting employees’ pay based on their previous income. And that policy, in turn, was intended to assure objectivity in the salary system – a legitimate business purpose, Fresno argued.
In 2015, U.S. Magistrate Judge Michael Seng of Fresno denied summary judgment to the school system. The Bureau of Labor Statistics, he said, has found that women teachers in the U.S. are systemically paid less than men. So salary scales like Fresno’s, which are based on prior pay, are inherently unequal. Fresno’s system, Judge Seng wrote, “is so inherently fraught with the risk – indeed, here, the virtual certainty — that it will perpetuate a discriminatory wage disparity between men and women that it cannot stand, even if motivated by a legitimate non-discriminatory business purpose.”
That may seem like an eminently reasonable if not downright self-evident conclusion, but it is actually a matter of debate among the federal circuits. As Judge Seng pointed out, the 10th and 11th Circuits have held that employers are not shielded from Equal Pay Act claims when salary structures based on prior wages result in disparate pay for men and women. In other words, prior salary does not constitute a “factor other than sex,” because gender is so often a factor in an employee’s previous salary. The 7th and 8th Circuits, however, have ruled that basing pay on prior salary history is a legitimate defense against Equal Pay Act claims.
Recognizing the appellate controversy, Judge Seng certified his ruling for an interlocutory appeal to the 9th Circuit, which construed the core question to be purely one of law: whether Seng correctly concluded that employers are not exempt from Equal Pay Act suits because they base employee pay on salary history.
The 9th Circuit set precedent on this question in 1982’s Kouba v. Allstate. Like Aileen Rizo, Lola Kouba claimed women were disadvantaged by her employer’s system of basing compensation on salary history because that system perpetuated sex-based underpayment. Allstate, like the Fresno school system, said it had gender-neutral business reasons to base employees’ starting salaries on their previous income. The 9th Circuit agreed with Kouba that employers could misuse purportedly neutral salary systems to underpay women based on their historically disparate wages. But it held that if employers can show a legitimate business purpose for basing employee pay on what they earned at previous jobs, prior salary could qualify as a “factor other than sex” to exempt the employer from Equal Pay Act claims.
In Rizo’s case, the 9th Circuit panel – Judges Wallace Tashima and Andrew Hurwitz and U.S. District Judge Lynn Adelman of Milwaukee – refused to budge from Kouba precedent. In an April 27 opinion by Judge Adelman, the court said its holding in Kouba “was to allow an employer to base a pay differential on prior salary so long as it showed that its use of prior salary effectuated some business policy and that the employer used the factor reasonably in light of its stated purpose and its other practices.” Sometimes appellate panels will chafe at binding precedent and suggest en banc review. This panel did not.
Rizo’s lawyers at Siegel & Yee presented a stirring argument for en banc reconsideration of the panel’s decision. “The practice approved by the court simply perpetuates the history of gender bias in American society, contrary to the explicit purpose of the Equal Pay Act,” they wrote. “The possibility that an employer could justify a factor that causes a wage differential between men and women by showing that it is based upon ‘an acceptable business reason’ may be reasonable in the abstract and practical under certain circumstances. But a business reason that is tantamount to an endorsement of practices forbidden by the Equal Pay Act - a factor based on historical market forces - should never be allowed.”
In opposition, Fresno’s lawyers at McCormick Barstow Sheppard Wayte & Carruth argued that the Equal Pay Act specifically shields employers from liability for policies that result in wage disparities based on factors other than an employee’s sex. Salary history is such a factor, the brief said. “The statutory language is plain and admits no qualification or exception,” Fresno wrote. “Courts are not empowered to devise and implement presumptions absent clear legislative directive. They further are not in place to trouble-shoot and develop national policies concerning compensation in general or employment discrimination in particular … If the EPA needs amending to address the concerns expressed here for gender-based pay disparity on a macroeconomic scale, Congress is uniquely situated and constitutionally authorized to investigate, analyze, report on, debate, and (if advised) enact the proper solution.”
The Rizo en banc petition attracted considerable amicus attention. The Equal Employment Opportunity Commission was already backing Rizo during arguments before the 9th Circuit panel. It submitted a brief backing her rehearing request. So did three unions, the ACLU of Northern California, Equal Rights Advocates, the National Association of Working Women and more than a half-dozen other women’s and civil rights groups. It’s easy to understand why they’re all worried about equal pay. On Tuesday, even as the en banc 9th Circuit agreed to reconsider the Rizo case, the Trump administration rescinded a 2016 EEOC requirement that businesses report pay data differentiated by gender and race.
I wish I didn’t have to write this story. I wish the 54-year-old Equal Pay Act were so obsolete that we’d laugh salary disparity claims out of court. But instead, the evidence of systemic, sex-based salary disparities remains so pervasive that courts can’t decide whether salary history should be regarded as an objective assessment of an employee’s value or a warped reflection of bias against women with jobs.
My mom was in the workforce when the Equal Pay Act became law. My two daughters are now working women. I can only hope that by the time my future grandchildren go to work, no one will care what the 9th Circuit ruled in the Rizo case because no woman needs to resort to suing under the Equal Pay Act.