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Paul Zimmerman
pzimmerman@mrllp.com
310.299.5500

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The Gap Narrows

There’s good news regarding the gender pay gap – it continues to narrow, as recently confirmed by the Pew Research Center. No doubt, courts and legislatures throughout the U.S. are doing their part to ensure that this trend continues, which is particularly true out west.

Since this past January 1, 2018, employers in the California have been required to comply with California Labor Code §432.3, which prohibits them from asking job applicants about their salary histories (a law directly aimed at the compensation divide between men and women). And last April, the Ninth Circuit Court of Appeals weighed in on the issue.

In Rizo v. Yovino, the Court held that salary history cannot be used to justify pay inequity between male and female workers, and an employer that does so will be in violation of the Equal Pay Act (29 U.S.C. § 206(d)(1)). In other words, it is no longer a defense in a pay equity claim to argue that a woman has been paid less than a man for the same or substantially similar work simply by virtue of her prior position.

The Equal Pay Act does allow a difference in pay for the same or similar based upon (1) a seniority system, (2) a merit system, (3) a system which measures earnings by quantity or quality of production and (4) a differential based on any other factor other than sex. With its ruling in Rizo, the Court makes clear that one of these factors cannot be prior salary (whether alone or even in combination with other factors). This is a huge shift from the prevailing law in Ninth Circuit which permitted employers to rely on pay history in justifying salaries, something employers have been doing so for more than 35 years.

The result of the ruling in Rizo is, essentially, a retroactive application of the salary history laws, which the Court deemed necessary. In its words, “[t]o hold otherwise – to allow employers to capitalize on the persistence of the wage gap and perpetrate 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.”

Of note, the opinion in Rizo creates a circuit split, which means that the salary history issue is now on the radar for potential review by the U.S. Supreme Court review. More immediately, however, employers in Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon and Washington must audit their compensation structures and make all necessary adjustments accordingly.

This blog post is not offered as, and should not be relied on as, legal advice. You should consult an attorney for advice in specific situations.