Does it violate the Equal Pay Act to base new employees' salary on their prior salaries? | Katz Melinger PLLC
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Does it violate the Equal Pay Act to base new employees' salary on their prior salaries?

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The federal Equal Pay Act prohibits employers from paying women less than men for doing the same work, except in certain circumstances. If the U.S. Supreme Court agrees to hear a recent case from California, its ruling could define the limits of an employer's ability to base a new salary level on an employee's previous salary.

Background

The Equal Pay Act requires that employers provide "equal pay for equal work regardless of sex." There are four exceptions that allow disparity of pay level between men and women: seniority, merit, quality or quantity of production, or "any other factor other than sex." The issue in the California case is whether prior salary is "any other factor" that would allow pay differences between men and women.

The current case

On March 24, 2020, a California school district asked the U.S. Supreme Court to consider an equal pay case that the school district lost in the U.S. Court of Appeals for the 9th Circuit. In Yovino v. Rizo, an employee filed a lawsuit under the federal Equal Pay Act alleging that the school district's act of basing her new salary on her prior salary violated the Act.

The employee argues that, because prior salary may have been set in a discriminatory way based on sex, using it to set her salary level at a new employer would perpetuate historical inequality in pay based on gender and violate the Act.

The case ended up before an 11-judge panel of the 9th Circuit, which, on Feb. 27, agreed with the employee's argument and held that prior salary is never an appropriate factor "other than sex" on which an employer can base unequal wages.

Disagreement between the federal courts

In its petition, the employer urges the Supreme Court to hear the case to decide an elaborate split between federal circuits:

· The 9th Circuit says an employer may never consider prior salary when setting new wages.

· The 4th, 7th and 8th Circuit courts say an employer may always consider prior salary.

· The 10th and 11th Circuit courts say an employer may consider it, but only in combination with another allowable factor.

· The 6th and 2nd (which binds most New York employers) Circuit courts say prior salary can be considered so long as there is a legitimate business reason for doing so.

We will keep an eye on this petition for a writ of certiorari to see if the Supreme Court agrees to hear the case and possibly create a uniform national rule - applicable in New York - on whether employer consideration of a new hire's prior salary in setting their new salary violates the Equal Pay Act.

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