On April 9, 2018, the Ninth Circuit Court of Appeals in Rizo v. Yovino unequivocally held that employers cannot consider an employee’s prior salary either alone, or in combination with other factors, to justify salary differentials based on gender under the Federal Equal Pay Act. California already legislated a similar approach embraced by the Ninth Circuit through amendments to the California Equal Pay Act that were made in 2015.
The Rizo v. Yovino Ninth Circuit decision contradicts a 1982 Ninth circuit decision, Kouba v. Allstate Insurance Co. wherein it held that an employee’s prior pay was a factor other than sex that could be considered in gendered based wage differentials for the purpose of the Federal Equal Pay Act. Whether these contrary decisions by the same Court will be reviewed by the United States Supreme Court is uncertain.
Under the present state of the law employers should not take an employee’s prior salary into consideration when setting wages. If they do they may run afoul of the Federal and California Equal Pay Acts. Before you set a salary consult with your attorney, memorialize the reasoning and factors that justify setting each employee’s salary. Make sure prior salary plays no part in setting employee compensation.
The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.
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