Discrimination Begets Discrimination: The Ninth Circuit Allows Prior Salary to Justify Paying Women Less Than Men for the Same Work

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Posted in: Civil Rights

Aileen Rizo discovered a simple fact and brought it to her employer’s attention: she was paid less for doing the same job as her male counterparts. Although her employer conceded she was right—as the only woman in her particular position, she made less than all of men doing exactly the same work—it refused to equalize her pay. Instead, it explained that she was paid less because she had been paid less in her prior job, and salaries were set based on prior salary alone. A federal appellate court just sided with the employer, even though reliance on prior salary is known to perpetuate the pay gap between men and women.

The Equal Pay Act: A Basic Guarantee

The first federal law to address discrimination against women at work was the Equal Pay Act (EPA) of 1963. The law is simple: It guarantees equal pay for equal work for men and women who do the same job for the same employer. An early public service announcement dramatized this simple guarantee by having Batgirl demand the same pay as Robin from Batman. The Equal Pay Act is an important source of protection against pay discrimination. A plaintiff may challenge an ongoing violation of the Equal Pay Act at any time, and may seek recovery for the prior two years of discrimination (or three years, if the violation is “willful”).

The act, however, has some limitations. An employee, for example, cannot win an EPA claim without a comparator—that is, an actual man to whom she can point who is working for the same employer, doing the same job, and earning more than she is. A woman who holds a unique job in a workplace, or simply holds a job that is not the exact equivalent of any job performed in that workplace by a higher-earning man, will have no hope of prevailing under the Equal Pay Act, even if it can clearly be proven that the employer paid her less because of her sex. She might have a claim under Title VII’s more general ban on sex discrimination by employers, but proving pay discrimination under that law comes with its own set of challenges. Title VII prohibits employers from taking sex into account when setting or raising pay, but comes with an extraordinarily short statute of limitations, a particular problem for pay discrimination claimants given the secrecy that usually surrounds salaries.

Unlike Title VII, the EPA does not permit awards of compensatory or punitive damages; prevailing plaintiffs are limited to back pay and certain other, more limited, types of relief. But one of the most significant limitations applies to pay discrimination claims under either statute. Employers have the opportunity to prove one of several affirmative defenses even when pay discrimination (defined differently under the two statutes) is proven. These defenses were written into the text of the Equal Pay Act when it was adopted and applied to Title VII pay claims later through something called the Bennett Amendment.

The most troubling affirmative defense is based on an employer’s claim that the proven pay disparity is due to “a factor other than sex.” After all, the thinking goes, if the pay disparity is based on something other than sex, then it isn’t based on sex, and therefore isn’t discriminatory. One problem is that this defense has been used to justify pay disparities that have no legitimate business reason. There is support for the idea, for example, that a salary set by mistake, which just happens to pay a woman less than her male counterpart, can be justified as a factor other than sex. That careless employer could conceivably continue paying his female employee less, even after discovering the mistake, because her sex did not create the unjustifiable disparity. Even more of a problem, though, is that the factor-other-than-sex defense has been broadly construed to include factors that are themselves the product of sex discrimination, thus grandfathering discriminatory pay potentially forever. Reliance on prior salary is chief among such factors. As law professor Deborah Brake has argued, “this defense has the potential to unravel altogether the comparator-driven model of the pay discrimination claim.”

Rizo v. Yovino: A Prior Salary Case

Aileen Rizo works for the public schools in Fresno County, California, as a math consultant. Prior to working there, she had worked as a middle school math teacher in Arizona. When she left that job, she was earning $50,630 per year plus an annual stipend of $1,200 because she had a master’s degree.

Fresno County had a very formulaic method for determining the starting salary of a new employee. Under “Standard Operations Procedure 1440,” the starting salaries of management-level employees are determined by a level-and-step system, similar to many civil service pay systems. New math consultants, like Aileen Rizo, begin with a Level 1 salary that can range anywhere from $62,133 at Step 1 to $81,461 at Step 10. By policy, the County sets the starting salary, within the designated range, by taking the employee’s most recent prior salary and adding five percent. For Rizo, that would have led to a salary below the permissible range, so she was bumped to the minimum salary a math consultant could earn – $62,133. (She also received a $600 annual stipend because of her master’s degree.) Level 1, step 1.

While having lunch with colleagues one day, Rizo was surprised by the revelation of a newly hired male math consultant that he started at level 1, step 9, giving him a salary that was almost $20,000 per year more than hers for doing exactly the same job. Rizo then also learned that all of the other math consultants—all male—were paid more than she was.

When Rizo complained to the County about the pay disparity, she was told that all the salaries had been properly set under the Standard Operations Procedure 1440. But this officiously named program simply gave the employer a shield to hide behind despite proof of a stark pay disparity between the men and the one woman in the position of math consultant.

The Equal Pay Act imposes strict liability for pay discrimination, which means that liability does not require proof of the employer’s intent to discriminate. (This is in contrast to a pay discrimination claim under Title VII, for which the employee must show that the employer took sex into account when setting or raising her salary.) Thus, proof of a pay disparity between a woman and a male counterpart is enough to make out a prima facie (i.e., initial) case of unlawfully unequal pay. But after proof of the pay disparity, the burden shifts to the employer to prove that the wage disparity can be explained by a factor other than sex (or one of three other affirmative defenses such as that it was based on a seniority system).

At this stage in Rizo’s case, Fresno County moved for summary judgment—a motion for a judgment without a trial on the theory that its wage-setting practices were definitively based on something other than sex. It had a system—jobs were tied to salary levels, and specific salaries were set within the permissible range by looking at prior salary and adding five percent. There was no room in the system, the County argued, for the decision-maker to take sex into account.

The trial judge disagreed, concluding that a system that relies on prior salary alone cannot qualify as “a factor other than sex” given the possibility, indeed the likelihood, that prior salaries reflect discrimination. A “pay structure based exclusively on prior wages,” the trial court explained, “is so inherently fraught with the risk . . . that it will perpetuate a discriminatory wage disparity between men and women that it cannot stand, even if motivated by a legitimate business purpose.” The court thus denied the employer’s motion for summary judgment.

The question on appeal to the Ninth Circuit was whether this conclusion was permissible given the precedent in another Ninth Circuit case, Kouba v. Allstate Insurance Co. (1982). In that case, the court held that prior salary could constitute a “factor other than sex” if it “effectuate[s] some business policy” and the employer uses it “reasonably in light of [its] stated purpose as well as its other practices.” The trial court reasoned that this ruling did not prevent it from holding that prior salary could never suffice if it was the only factor used to set salary—a position taken by courts in many other jurisdictions—but the Ninth Circuit disagreed with this reading of Kouba.

The Ninth Circuit reversed the denial of summary judgment, remanding for consideration under a “proper” reading of Kouba. It directed the district court to consider whether the County’s business reasons for using that particular method of setting pay meant that it was using prior salary “reasonably” as required by Kouba.

The County offered four reasons for relying on SOP 1440: (1) the policy is objective, precluding any subjective determination about the employee’s value from entering the calculation; (2) the policy entices candidates to leave their current jobs because they will receive a five percent raise (unless they are already above the maximum salary for the job); (3) the policy prevents favoritism and ensures consistency in wage setting; and (4) the policy is a judicious use of taxpayer dollars. Do these reasons mean that the County acted “reasonably” in relying so heavily on prior salary? That will be the question for the trial court on remand, when the County will have the burden to prove that it did.

Why This Matters (and Harms Women)

By leaving the door open to a system that blindly relies on prior salary despite irrefutable evidence that this contributes to the gender wage gap, the Ninth Circuit has ensured its perpetuation. Although my 11-year-old son cutely asked me the other day whether women still get paid less than men “since that seems so 1700s,” the gender wage gap is very real and hasn’t lessened much since the 1980s. Women earn less than men in the United States (roughly 80 cents on the dollar, less in some states like Texas), even when doing the same job in the same conditions. The gap occurs at all levels of the occupational spectrum, across all jobs, and grows throughout the life cycle. It falls most harshly on African American and Latina women. Scholars may disagree on the exact size of the gap, but they do not disagree that it exists nor that some portion of it is explained by discrimination.

Given the existence and persistence of the wage gap, the role of prior salary in setting wages should be minimized if not eliminated entirely. The facts of this case illustrate the problem beautifully—the “objective” formula for setting salary allowed two identical new hires to be paid vastly different salaries. Massachusetts has accomplished this by giving employers a list of specific factors that can be taken into account such as education, training, and experience; it also requires that employers bear the burden of showing that “such factors are reasonably related to the particular job in question and consistent with business necessity.” New York and California have taken similar steps (but not in time to help this plaintiff). This approach makes sense because it guides the employer towards relevant criteria that are less likely to perpetuate discrimination—and imposes the burden on them to defend any resulting pay disparity. This is an important shift because no two employees will bring identical resumes to the table. If an employer can defend against an equal pay claim by rummaging through the files and coming up with some ostensibly relevant difference, the law is providing very little protection. In the approach taken by these states, the employer cannot just point to any difference and claim it was dispositive; it must show that the particular difference was a relevant and necessary consideration for the particular job.

Massachusetts takes its effort to equalize pay one step further: the new pay law does not allow an employer to ask an applicant about salary history (or seek the information directly from a prior employer) until after “any offer of employment with compensation has been made to the prospective employee.” In other words, Massachusetts also deals with the prior-salary problem by eliminating it. This provision helpfully shifts focus from the employee to the job—and forces the employer to think about how much the work is worth rather than how much the person is worth. This eliminates many of the factors that seem to perpetuate the wage gap, such as how well an applicant negotiates a starting salary or how the employer might assess an applicant’s worth based on stereotyped views of women.

In Aileen Riza’s case, the EEOC filed a friend-of-the-court brief arguing that prior salary alone cannot qualify as a factor other than sex because it perpetuates existing pay disparities and undermines the purpose of the Equal Pay Act. But the Ninth Circuit was either unconvinced, or genuinely felt bound by its prior ruling in Kouba. (In general, three-judge panels of an appellate court do not have the power to overrule decision from prior three-judge panels; only an en banc panel can do so.) Either way, it has done a disservice to women, who were guaranteed equal pay for equal work more than fifty years ago. Business as usual is not going to eliminate the longstanding pay gap.

  • PeacePromoter

    Re: “The Ninth Circuit Allows Prior Salary to Justify Paying Women Less Than Men for the Same Work”

    Did the court say it does NOT allow a prior salary to justify paying MEN less than women and other men for the same work? I don’t think so.

    Re: “Women earn less than men in the United States (roughly 80 cents on the dollar, less in some states like Texas), even when doing the same job in the same conditions.”

    Joanna, I hate to be the one to tell you this, but you’re way off base and being ideological.

    Please think through a different very carefully:

    Women’s advocates insist employers everywhere pay women less than men for doing exactly the same work in the exact same occupations and careers, working side-by-side with men on the same job for the same organization, working the same number of hours per week, traveling the same amount of time for work obligations, with the same exact work experience and education, with exactly the same level of productivity.

    Yet these advocates also seem to think employers’ prime modus operandi is greed. (“Corporate greed” may be one of the Left’s more salient rallying calls.) Thus they no doubt believe employers would hire only illegal immigrants for their lower labor cost if they could get away with it (many do get away with it), or would move their business to a cheap-labor country to save money, or would replace old workers with young ones for the same reason.

    So why do these same advocates think employers would NOT hire only women if, as they say, employers DO get away with paying females at a lower rate than males for the same work?

    Many of America’s most sophisticated women choose to earn less than their male counterparts:

    “Female physicians worked about 5 hours fewer per week than their male counterparts through age 54….” https://www.aamc.org/download/426242/data/ihsreportdownload.pdf?cm_mmc=AAMC-_-ScientificAffairs-_-PDF-_-ihsreport

    “In 2011, 22% of male physicians and 44% of female physicians worked less than full time, up from 7% of men and 29% of women from Cejka’s 2005 survey.” ama-assn.org/amednews/2012/03/26/bil10326.htm

    “…[O]nly 35 percent of women who have earned MBAs after getting a bachelor’s degree from a top school are working full time.” It “is not surprising that women are not showing up more often in corporations’ top ranks.” http://malemattersusa.wordpress.com/2014/04/25/why-women-are-leaving-the-workforce-in-record-numbers/

    “Compared to men, women view professional advancement as equally attainable, but less desirable” http://www.pnas.org/content/early/2015/09/15/1502567112.full.pdf

    “Women Dominate College Majors That Lead to Lower-Paying Work” -Harvard Business Review, April 19, 2017
    https://hbr.org/2017/04/women-dominate-college-majors-that-lead-to-lower-paying-work

    See other reasons the wage gap hasn’t closed after thousands of measures over many decades:

    “Salary Secrecy — Discrimination Against Women?” http://malemattersusa.wordpress.com/2014/10/27/salary-secrecy-discrimination-against-women/

    “Women Don’t Ask: The High Cost of Avoiding Negotiation–and Positive Strategies for Change”
    https://www.amazon.com/dp/0553383876/?tag=thneyo0f-20

    “If Iceland’s So Gender Equal, Then Why Has It Such A Large Gender Pay Gap?”
    https://malemattersusa.wordpress.com/2017/04/05/if-icelands-so-gender-equal-then-why-has-it-such-a-large-gender-pay-gap/

    PS:

    More and more people have become aware of the real causes of the gender wage gap. (Read the growing number of comments at the end of reports on the gap.) Thus liberals’ long-running, false wage-gap narrative has, I believe, helped hugely to create this:

    “Republicans don’t have near as big a woman problem as Democrats have a man problem.” WSJ
    http://www.wsj.com/articles/kim-strassel-america-is-war-on-women-weary-1412900814

    And this:

    “The whole Democratic Party is now a smoking pile of rubble: In state government things are worse, if anything. The GOP now controls historical record number of governors’ mansions, including a majority of New England governorships. Tuesday’s election swapped around a few state legislative houses but left Democrats controlling a distinct minority. The same story applies further down ballot, where most elected attorneys general, insurance commissioners, secretaries of state, and so forth are Republicans.” http://www.vox.com/policy-and-politics/2016/11/10/13576488/democratic-party-smoking-pile-rubble

    • UtahTwisted

      You are correct. Too bad the social justice crowd can’t see past their preconceived notions.

  • linda lipscomb

    This is one of the stupidest, most short sighted decisions I have ever read! It’s ok to discriminate now, because you can show that you discriminated in the past. Shades of circular Trumpian thought – or lack of thought? – no, purposeful thought!

    • UtahTwisted

      treating everyone the same is the exact opposite of discrimination.

  • UtahTwisted

    The “wage gap” myth continues to roll on and gain favor despite no evidence of such a gap. It is disappointing to see the legal profession and seemingly scholarly articles such as this perpetuate this myth.