Equal Pay Act Claims – U.S. Supreme Court Vacates Ninth Circuit Court’s Decision

The United States Supreme Court recently vacated a decision by the Ninth Circuit Court of Appeals regarding what an employer may consider when establishing salaries. The Supreme Court did not reach the merits of this case; instead, its decision was based solely upon a technical issue involving the effect of one judge’s death on the validity of the Ninth Circuit Court’s decision. Nevertheless, because the Ninth Circuit’s ruling in Yovino v. Rizo was significant for employers and because the Supreme Court sent the case back to the Ninth Circuit to reconsider, it is important for employers to be aware of this decision.

The Equal Pay Act of 1963 (EPA) amended the Fair Labor Standards Act (FLSA) to prohibit wage discrimination “between employees on the basis of sex” “for equal work on jobs the performance of which requires equal skill, effort, and responsibility, and which are performed under similar working conditions.” The exceptions to this prohibition are where a wage disparity exists pursuant to: “(i) a seniority system; (ii) a merit system; (iii) a system which measures earnings by quantity or quality of production; or (iv) a differential based on any other factor other than sex.”

The employer in Yovino v. Rizo argued that the discrepancy between Aileen Rizo’s pay and her male counterparts was based upon prior salary history – a factor other than sex permitted by the fourth, “catch-all,” exception to the EPA. The Ninth Circuit Court disagreed and explicitly held that “prior salary alone or in combination with other factors cannot justify a wage differential between male and female employees.” The Court explained: “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.”

Some states already prohibit employers from asking about and considering prior salary in determining compensation. Nevada does not have such a prohibition. Unless the parties in Yovino resolve this matter, it is likely that the Ninth Circuit Court will issue a new decision in the case with the same or similar result as before. As such, employers are wise to be prepared and understand what factors can be safely used in determining fair and equitable compensation. If you have questions about this case or the EPA, please contact a KZA attorney.

KZA Employer Report articles are for general information only; they are not intended and should not be construed to be legal advice. Reading or replying to such articles does not establish an attorney-client relationship. In addition, because the subject matters and applicable laws discussed in Employer Report articles are often in a state of change and not always applicable to every type of business entity or organization, readers should consult with counsel before making decisions based on the same.