Equal pay: Federal courts add another twist

The U.S. Supreme Court just rejected an equal pay lawsuit for a most unusual reason. Even so, employers can learn valuable lessons from the case.

THE LAW The Equal Pay Act requires employers to pay women the same as men for performing substantially the same work. It has been the law of the land since 1963, yet women’s pay still lags significantly behind that of men.

Buttressing the EPA’s protections is Title VII of the Civil Rights Act of 1964, which bars discrimination in any aspect of employment on the basis of sex.

In addition, the Lilly Ledbetter Fair Pay Act allows employees to sue for the effects of long-standing pay discrimination.

As it stands now, 13 states and 11 major cities prohibit employers from asking an employee’s salary history, on the theory that basing current salary on previous pay may perpetuate gender-based discrimination.

WHAT’S NEW A recent case could have added clarity to how federal courts approach pay equity cases. It may still.

Aileen, a math consultant for the Fresno County, Calif., school system, was hired in 2009. The county’s practice at the time was to pay new hires 5% more than they earned in their previous positions and then fit them into the system’s salary structure.

She later learned that men hired after her for substantially the same work were earning more than she was. Presumably, they came from higher-paying positions.

After complaining without success, Aileen sued, alleging the county’s practice violated the EPA because it institutionalized existing gender-based pay discrimination.

The case eventually wound up before the 9th Circuit Court of Appeals, where a three-judge panel ruled against Aileen. However, it referred the case to the full court because of its importance.

The employer argued that the EPA allows employers to vary pay based on a seniority system, a merit system, a system that measures earnings by quantity or quality of production or a differential based on any other factor other than sex. The county argued it was protected because salary history is a “factor other than sex.”

Six of the 11 judges, using different legal reasoning, ruled in Aileen’s favor.

An untimely death

However, Judge Stephen Reinhardt, who wrote the majority opinion, died before the decision was announced.

The decision is one of the most expansive ever issued on the problem of pay equity. It states that “prior salary alone or in combination with other factors cannot justify a wage differential. To hold otherwise—to allow employers to capitalize on the persistence of the wage gap and perpetuate that gap ad infinitum—would be contrary to the text and history of the Equal Pay Act, and would vitiate the very purpose for which the Act stands.”

The county appealed to the U.S. Supreme Court, claiming that Judge Reinhardt’s death invalidated the ruling.

Without addressing the case’s merits, the Supreme Court in February 2019 vacated the decision and sent it back to the 9th Circuit for reconsideration. As the High Court noted, “federal judges are appointed for life, not eternity.” (Yovino v. Rizo, U.S. Supreme Court, 2019)

HOW TO COMPLY Because of the judge’s untimely death, no law changed.

Three other circuits—the 2nd, 6th and 11th—have interpreted the EPA similarly to the way the 9th Circuit did. However, none of those appeals courts explicitly outlawed the use of salary history in the same blunt way the 9th did.

Each circuit court, in its own way, allowed employers to consider various factors on a case-by-case basis.

With nuances differing, there is a circuit court split that the Supreme Court may ultimately have to address, regardless of how the 9th Circuit decision finally comes down.

Impact on employers

The first step employers should take is to consult with their attorneys to determine which EPA interpretation governs their operations, depending on which circuit applies. Additionally, state laws and local ordinances barring salary history requests must be factored into employers’ compensation decision-making.

Adjust all hiring and pay policies to conform with existing laws and precedent.

All this judicial action should be a clear warning sign to employers that unequal pay and all the practices that support it are under attack. Despite robust job numbers, wage growth still lags behind many employees’ expectations. Discovering a pay disparity may be the “Aha!” moment that prompts a disgruntled employee to call a lawyer.

Advice: Be proactive in addressing pay disparities. Start by analyzing pay gaps between women and men performing the same work. Address any disparities found before someone decides to file a lawsuit!

By analyzing salary negotiation practices, you can ensure new hires will not create legal problems by obtaining disproportionately higher or lower salaries than similarly situated employees. Finally, to ensure employees are performing substantially similar work, ensure all your job descriptions are up to date.