When setting wages for new hires, the Equal Pay Act (EPA) doesn’t allow consideration of prior salary, ruled the U.S. Ninth Circuit Court of Appeals. A female math consultant hired by a county school district sued when she discovered her male colleagues in the same position were earning more than she was. The county defended itself by pointing to its longstanding policy that pegged new hires’ pay at 5 percent above what they were previously earning. She had earned less in her past job than her male colleagues had earned in theirs, so the county offered her less money.
The EPA generally forbids differences in wages between men and women at the same location who perform equal work on jobs that require equal skill, effort, and responsibility and are performed under similar working conditions. There are four exceptions, which can be used to legitimately explain a pay disparity: seniority, merit, production, or “any other factor other than sex.” The court ruled that any reasons that fit into the catchall category must be “legitimate, job-related factors such as a prospective employee’s experience, educational background, ability, or prior job performance.” Relying on prior salary is unacceptable because it doesn’t directly relate to the new position and it perpetuates any pay discrimination that past employers may have committed (Rizo v. Yovino, 9th Cir, April 2018).
Tips For Employers: The court said that its new ruling doesn’t necessarily preclude individualized salary negotiations that may refer to prior salary. It’s an open question, and the court will reserve judgment until an actual case comes before the court. The safest approach is to develop a pay structure that can be applied consistently to all entering workers without regard to what past employers may have paid. You should also eliminate any questions on your employment application that ask about prior wages. In addition, be sure to check state and local laws; California (effective January 1, 2018), Oregon (enforced beginning January 1, 2019), and Washington (effective June 7, 2018) specifically restrict employers’ ability to ask any questions about wage history. For more information on the EPA as well as other federal and state laws on pay equity and pay discrimination, see our newly updated Legal Guide, “Equal Pay: Avoid the Pitfalls” or learn more about our flat fee employment law advice.