The Last Roar of the ‘Liberal Lion’: Judge Stephen Reinhardt Reverses Ruling That Would Have Allowed Employers to Justify Women’s Lower Wages by Prior Salaries

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Posted in: Civil Rights

Ninth Circuit judge Stephen Reinhardt passed away recently at the age of 87. He was larger than life on the bench and like a dog with a chew toy when it came to protecting our basic rights and freedoms. (A lovely tribute by his former clerk Heather Gerken can be found here, and one by his former clerk and fellow Verdict co-columnist Michael C. Dorf here.) He was committed to justice, and a staunch defense of equality was a component of that commitment.

Judge Reinhardt will be remembered for many things, but perhaps his last notch was an en banc opinion in Rizo v. Yovino, in which he reversed an interpretation of the Equal Pay Act that allowed prior discrimination to justify present discrimination. This ruling cuts off one of the loopholes that has been used countless times to avoid rectifying sex-based pay discrimination. In Reinhardt’s view, this case presented a simple question with a simple answer.

As he wrote in Rizo, “[t]he Equal Pay Act stands for a principle as simple as it is just: men and women should receive equal pay regardless of sex. The question before us is also simple: can an employer justify a wage differential between male and female employees by relying on prior salary? Based on the text, history, and purpose of the Equal Pay Act, the answer is clear: No.”

Come On, Aileen, Just Work for Less

Aileen Rizo worked as a math consultant for the Fresno County Office of Education. (Despite the old stereotype, girls are not bad at math. Studies show unconscious bias even in grading something as ostensibly objective as a math test—when anonymously graded, girls score higher, but with names on their papers, lower.) Like many other working women, she discovered during a casual conversation with a co-worker that male math consultants were hired in at a higher salary. When she discovered she was paid less than her male counterparts, she brought that fact to her employer’s attention, perhaps naively expecting that the employer would be embarrassed by the unjustified disparity and would fix it.

Although her employer did concede she was right—she was the only woman in this particular job and made less than all of the men doing exactly the same work—it refused to raise her pay to match that of her co-workers. Rather, the employer explained that all salaries were based on a formal set of rules and that the rules placed heavy emphasis on prior salary. She made less than the men who were doing the same job, her employer explained, because they had made more in previous jobs. (Additional details about the facts and the specific salary-setting rules in play are available here.) When she sued, the county moved for summary judgment on the ground that use of prior salary is a defense to an Equal Pay Act claim even if it results in substantial gender-based pay differentials.

At the trial court level, the judge denied summary judgment to the county, explaining that the county’s pay structure that is “based exclusively on prior wages is so inherently fraught with the risk—indeed, here, the virtual certainty—that it will perpetuate a discriminatory wage disparity between men and women that it cannot stand.” It certified the ruling for a so-called interlocutory appeal, which meant that the US Court of Appeals for the Ninth Circuit could review the case even though the district court had not yet issued a final judgment.

On appeal, the outcome was different. Even though reliance on prior salary is known to perpetuate the longstanding and retrenched gender pay gap, a three-judge panel of the Ninth Circuit rejected Aileen’s claim. As explained in more detail below, that panel felt itself bound by a prior Ninth Circuit ruling that could only be overturned by an en banc panel. Rizo successfully moved for rehearing en banc—in the Ninth Circuit, that means a review by eleven judges rather than all sitting judges—and won. The majority’s ruling was unanimous, with three judges writing separately to concur.

The Equal Pay Act: A Basic Guarantee That Is Insufficiently Protective of Equality

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. The beauty of the EPA is that it does not require evidence of intentional discrimination; the pay disparity itself is proof of discrimination. But, as Judge Reinhardt wrote in the recent opinion, “[a]lthough the Act has prohibited sex-based wage discrimination for more than fifty years, the financial exploitation of working women embodied by the gender pay gap continues to be an embarrassing reality of our economy.”

Title VII, the main federal anti-discrimination statute, can also be invoked to challenge gender-based pay discrimination. Depending on the case, it may be a better or worse choice for a plaintiff. Title VII, for example, requires proof that the discrimination was intentional—that the employer consciously took sex into account when making a pay decision, while the EPA is a strict liability statute. Title VII also permits awards of compensatory or punitive damages for discrimination, while the EPA limits prevailing plaintiffs to back pay and certain other limited forms of relief. But one thing the statutes have in common is a set of affirmative defenses that the employer can prove in order to avoid liability despite proof of a sex-based pay disparity. 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 affirmative defense at issue in Rizo allows an employer to justify a proven pay disparity by showing that it was due to “a factor other than sex.” In other words, we presume that a proven pay disparity between a man and a woman who do equal work is due to their sex, unless the employer proves to us that the opposite is true—that the disparity has an explanation other than discrimination. Prior salary is one of the things employers cite as a “factor other than sex.”

One problem with this affirmative defense is that many courts have permitted employers to use it even though the explanation makes no business sense. For example, an employer might successfully prove that it paid a woman less because of a math error—not because she was a woman—and avoid liability for a proven pay disparity. But the more common and thus more damaging problem is when this defense is used to include factors that are themselves the product of sex discrimination, thus grandfathering in discrimination that other employers may have engaged in without being hauled into court. Reliance on prior salary is chief among the explanations that have this effect.

The New Ruling in Rizo v. Yovino

When this case went before the three-judge appellate panel, the question was whether prior precedent permitted the district court’s conclusion that the county’s heavy reliance on prior salary was inconsistent with the mandates of the EPA. The question arose because of a 1982 ruling by the Ninth Circuit in Kouba v. Allstate Insurance Co., in which 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 three-judge panel disagreed with this reading of Kouba. It felt, to the contrary, that Kouba did not specify that prior salary could only be used in combination with other factors, thus suggesting that it, like other factors, could be the sole basis for a salary disparity.

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. But, instead, the case was accepted for another round of appellate review.

In the en banc opinion just issued, Judge Reinhardt overruled Kouba and held that the EPA cannot be construed to allow gender-based pay disparities to be based on prior salary. Rather, the court held, the “factor other than sex” defense is limited to “legitimate, job-related factors such as a prospective employee’s experience, educational background, ability, or prior job performance.” Salaries should reflect the job, not society’s past treatment of the person who performs it.

In reaching this conclusion, the court first reasoned that reliance on prior salary is inconsistent with the intent of the legislators who passed the EPA in the first instance. Given that Congress’s purpose in passing the EPA was to eliminate “endemic” sex-based wage disparities, the court found it implausible that would also allow disparities to be justified by other sex-based disparities. In 1963, when the EPA became law, “prior salary” considerations would have resulted in dramatically disparate salaries for men and women given the state of the law and marketplace at the time. The EPA was supposed to correct disparities created by a system that clung to the “outmoded belief that women should be paid less than men.” As the court concluded, “Congress simply could not have intended to allow employers to rely on these discriminatory wages as a justification for continuing to perpetuate wage differentials.”

Second, the court found support in standard principles of statutory interpretation. When read in light of the legislative history and surrounding context, one must limit the “factor other than sex” defense to reasons that are job related and thus of some necessity to the employer. The county’s proposed interpretation—that any gender-neutral rule can suffice—is inconsistent with the text, meaning, and intent behind the law. Moreover, a catchall exception at the end of the list is, by those same standard principles, to be construed in a way that fits the context and does not give “unintended breadth to the Acts of Congress.” In other words, “a word is known by the company it keeps.”

Third, the court mined legislative history for evidence that the “factor other than sex” defense was added to appease employers who were specifically concerned that the other defenses already included in the bill were not sufficient to ensure that they could rely on legitimate, job-related criteria in setting pay. That history also militates in favor of a narrow reading of the defense rather than the broad one urged in Rizo by the county.

Fourth, the court noted that other federal appellate courts, including the Eleventh and Second Circuits, have applied a job-relatedness requirement to this defense.

In sum, the en banc court rejected reliance on prior salary because “it is not a legitimate measure of work experience, ability, performance, or any other job-related quality.” While the court noted that it may “bear a rough relationship to legitimate factors other than sex,” that connection is attenuated at best. And the cost of allowing prior salary to operate as a proxy for an employee’s worth is that it “may well operate to perpetuate the wage disparities prohibited under the Act.” The employer can still rely on the employee’s experience, ability, or performance, but it must do so directly rather than with the blunt instrument of prior salary. (In some states, this is now made clear by state law as well.)

Conclusion

The en banc panel got this one right, a fitting final decision from Judge Reinhardt. In the conclusion and in his words that led there, Judge Reinhardt stood up for women and their right to the equal opportunity to capitalize on their natural talents and abilities at work. After all, he wrote, the pay gap does not just cost women money—estimates are that it costs them $840 billion a year. “If money talks,” Judge Reinhardt wrote, “the message to women costs more than ‘just’ billions: women are told they are not worth as much as men.” Disallowing reliance on prior salary to justify a wage differential is one way to counter that harmful message.