Sunday, April 30, 2017

Rizo v. Yovino: Is it ok to rely solely on prior salary in setting pay?

The Ninth Circuit's new decision in Rizo v. Yovino, No. 16-15372 (Apr. 27, 2017), provides some timely guidance on the extent to which employers are allowed to rely on prior salary in setting a new employee's starting pay. Interpreting a decision from 1982, the court rejected the plaintiff's and the EEOC's contention that prior salary standing alone is per se insufficient under the Equal Pay Act to justify a pay differential between opposite-sex employees performing the same job.

The defendant hired Aileen Rizo as a math consultant, which the defendant classified as a management-level position. The defendant based the starting salary of math consultants on level 1 of the management pay scale. In 2009, level 1 had 10 steps, ranging from $62,133 at step 1 to $81,461 at step 10. The defendant set a newly hired math consultant's pay at the step that corresponded to the employee's prior salary, plus a 5% raise. Because the plaintiff's prior salary was only about $52,000, the defendant set the plaintiff's pay at the lowest step. The defendant also paid the plaintiff a stipend of $600 per year for having a master's degree, making her starting salary $62,733. After learning that male math consultants had been hired at higher steps of the level 1 management pay scale, Rizo filed an Equal Pay Act lawsuit. The district court denied the defendant's motion for summary judgment on the grounds that under the Equal Pay Act, an employer cannot justify a pay differential that is based solely on a starting employee's prior salary.

Like the EEOC, some federal courts, including the Eleventh Circuit, have concluded that prior salary alone cannot be used as a defense under the Equal Pay Act. Although the Ninth Circuit would appear to be in direct conflict with these other courts and the EEOC, I don' think that's as big a deal as it might initially seem to be.

First, and most important, there's confusion about what it even means for an employer to base starting salary solely on prior salary. In this case, the parties apparently did not dispute that the plaintiff's starting salary was based solely on her prior salary. Nevertheless, the court pointed out that the plaintiff's starting salary also reflected a $600 stipend based on her education, so in the court's view, the plaintiff's starting salary was not based solely on her prior salary. It is true, of course, that the step on the pay scale was based solely on the plaintiff's prior salary, but that just highlights an even more significant factor -- the pay scale itself. The minimum and maximum pay levels were limited by the 10 steps of the level 1 management pay scale. Unlike the men's starting salaries, the plaintiff's starting salary reflected a nearly 20% increase over her previous salary. If the plaintiff's prior salary had been the only factor in the setting of her pay, then she would have made considerably less. Oddly, this was pointed out by Judge Lynn Adelman during oral argument, but none of the parties or other judges picked up on this point.

Second, to prevail under the Equal Pay Act pursuant to Ninth Circuit precedent, an employer must show that its reliance on a particular factor, whether prior salary or some other factor, "'effectuate[s] some business policy' and that the employer 'use[s] the factor reasonably in light of the employer's stated purpose as well as its other practices.'"

Third, there is a difference between the factors that an employer relies on in setting a new employee's salary, and the factors that cause the pay disparity between opposite-sex employees in the same job. 
As the Ninth Circuit points out, even if an employer is prohibited from relying on prior salary alone, there will be some instances in which an employer will rely on multiple factors, but the factor causing the pay differential between opposite-sex employees will be prior salary alone:
For example, assume that a male and a female employee have the same education and number of years’ experience as each other, but the male employee was paid a higher prior salary than the female employee. The current employer sets salary by considering the employee’s education, years of experience, and prior salary. Using these factors, the employer gives both employees the same salary credit for their identical education and experience, but the employer pays the male employee a higher salary than the female employee because of his higher prior salary.
In this case, I think it's clear that the plaintiff's salary was based on several factors: the level 1 management pay scale, the plaintiff's education, and the plaintiff's prior salary. The higher pay of the male comparators, however, was apparently solely attributable to their higher prior salaries.

This approach to setting starting salaries is consistent with that of the federal government, as I noted in a discussion of North v. United States in this prior post. In that case, the court upheld the Department of Education's decision to offer a male attorney a higher starting salary than it offered the female plaintiff because he had earned more in his prior job.

Here, the district court rejected out of hand the defendant's reliance on prior salary because it was undisputed -- incorrectly, in my view -- that it was the sole factor that the employer relied upon. Thus, on remand, the district court will be required to determine whether the employer's asserted reasons for relying on prior salary effectuate a business policy and are used reasonably: 1) the policy is objective;  (2) the policy encourages candidates to leave their current jobs by providing a 5% pay increase over their current salary; (3) the policy prevents favoritism and ensures consistency; and (4) the policy is a judicious use of taxpayer dollars. 

This blog reflects the views solely of its author. It is not intended, and should not be regarded, as legal advice on how to analyze any particular set of facts.

The Application of Title VII's Religious Organization Exception to Sexual Orientation Discrimination

In a prior post, I noted that while the Seventh Circuit concluded in Hively v. Ivy Tech Community College that Title VII of the Civil Rights Act of 1964 prohibits sexual orientation discrimination, the court acknowledged that there were unanswered questions regarding the application of the prohibition to religious employers. In particular, the court suggested that a religious employer might be able to assert that it was permitted to discriminate based on sexual orientation pursuant to Title VII's religious organization exception, 42 U.S.C. § 2000e-1(a). In this post, I look at the religious organization exception in more detail and discuss the arguments pro and con as to whether the exception permits religious employers to discriminate against LGBT individuals based on employers' religious beliefs.

The religious organization exemption provides:

This subchapter shall not apply . . . to a religious corporation, association, educational institution, or society with respect to the employment of individuals of a particular religion to perform work connected with the carrying on by such corporation, association, educational institution, or society of its activities.
Courts have interpreted this provision to permit a religious employer to discriminate in favor of co-religionists, meaning workers sharing the employer's religious beliefs. For example, a Catholic employer could hire Catholics exclusively, though it could not hire Catholics and Jews exclusively. In addition, courts have interpreted the provision to allow religious employers to discriminate not only against individuals who do not share their religious beliefs but also against individuals whose conduct violates employers' religious beliefs. For example, in Little v. Wuerl, the Third Circuit concluded that the religious organization exception permitted a Catholic employer to fire an employee because her remarriage violated the employer's religious views.

Not surprisingly, because the exception merely allows a religious employer to discriminate based on religion, it does not sanction other forms of discrimination, such as sex discrimination. Thus, in EEOC v. Fremont Christian School, the court held that the exception did not authorize the defendant to provide a benefit to heads of households, which, based on the defendant's religious beliefs, could only be single persons and married men.

Relying on the interpretation of Title VII in cases like Fremont Christian School, some courts have concluded that a religious organization is not permitted to favor co-religionists if that means also discriminating on a prohibited basis other than religion. For example, in Richardson v. Northwest Christian University, Federal District Court Judge Ann Aiken relied on the interpretation of Title VII in Fremont Christian School to conclude that a similar religious organization exception under Oregon law did not permit the employer to discriminate against an employee for engaging in premarital sex, because doing so violated the state law's prohibition against marital status discrimination.

Similarly, in a 2015 law review article, George Washington University Law Professor Ira Lupu argues that Title VII's religious organization exception does not permit a religious employer to discriminate against gay men and lesbians. As an analogy, Lupu notes that an Orthodox Jewish employer would not be permitted to fire women who broke the Sabbath while overlooking the same conduct by male employees.

Although the ultimate conclusion that Title VII prohibits religious organizations from discriminating based on sexual orientation may be a viable interpretation of Title VII, the reasoning followed by Judge Aiken and Professor Lupu in reaching that conclusion is flawed. At bottom, it is correct that the religious organization exception does not authorize discrimination on a basis other than religion, and that is reflected in Fremont Christian School and Lupu's example of the Orthodox Jewish employer. Crucially, however, those cases merely involve sex discrimination and do not also involve religious favoritism. Thus, the question that must be answered is, Does Title VII permit an employer to engage in religious favoritism if, in so doing, it also engages in another form of prohibited discrimination under the statue, such as sex discrimination?

Considering the language and structure of Title VII, I think the better argument is that a religious organization is permitted to discriminate based on sexual orientation if the discrimination is based on religious objections to homosexuality. The exception states that Title VII does not apply when a religious organization engages in religious favoritism. An action that falls within the exception would therefore seem to be outside the bounds of Title VII, regardless of whether it would otherwise be prohibited by other provisions. Thus, once the exception applies, that's the end of the story, and there is no need to consider whether the action would simultaneously violate another provision since the exception has already established that Title VII does not apply.

On the other hand, if religious favoritism entails discrimination on a basis other than religion, then arguably the employer's right to engage in religious favoritism must be weighed against an employee's right to be protected against sex discrimination. In my view, however, the balance was struck by Congress when it provided that Title VII does not apply to instances of religious favoritism.

This blog reflects the views solely of its author. It is not intended, and should not be regarded, as legal advice on how to analyze any particular set of facts.

Friday, April 21, 2017

The Recent Push to Prohibit Employers from Asking Applicants About Their Salary History

In the ongoing effort to combat the wage gap between men and women, there has been a recent push to prohibit employers from requiring, or even asking, job applicants to disclose their salary history. The thinking here seems to be that, although the consideration of prior salary may appear to be facially neutral, it can perpetuate sex-based wage disparities.

Last summer, Massachusetts became the first state to adopt legislation prohibiting salary history inquiries. Philadelphia has passed a similar law, but has decided to put it on hold for the time being in light of a lawsuit filed by the Chamber of Commerce for Greater Philadelphia contending that the ordinance is an unconstitutional restriction on speech. Last year, similar proposed legislation was introduced in the D.C. Council by member David Grosso and in the U.S. Congress by Eleanor Holmes Norton and three cosponsors.

These laws and bills vary to some extent, but they generally focus on inquiries about salary history before an offer of employment or a salary offer is extended to a prospective employee. Because they do not prohibit prospective employees from voluntarily disclosing their salary histories, they may not necessarily foreclose employers from relying on prior salary information to some extent in setting a new employee's starting pay. For example, some applicants will likely voluntarily disclose their current salaries to try to negotiate higher starting pay with prospective employers. If an applicant currently earns $100,000 annually working for a competitor, an employer will likely have to offer at least that much to entice the individual to jump ship.

Although federal EEO law does not prohibit questions about salary history, that does not mean that employers are free to rely willy nilly on prior salary in setting a new employee's starting pay. Under the Equal Pay Act, an employer can only justify a wage discrepancy between employees of the opposite sex performing the same job by showing that the discrepancy is based on a factor other than sex. To the extent a prospective employee's prior salary is grounded in sex discrimination, reliance on that prior salary would not constitute a factor other than sex. Thus, in its Compliance Manual, the EEOC explains that it is impermissible under the Equal Pay Act to rely solely on prior salary to justify a pay discrepancy between a man and a woman in the same job:
However, if the employer can prove that sex was not a factor in its consideration of prior salary, and that other factors were also considered, then the justification can succeed. The employer could, for example, show that it: (1) determined that the prior salary accurately reflected the employee's ability based on his or her job-related qualifications; and (2) considered the prior salary, but did not rely solely on it in setting the employee's current salary.
Federal agencies are authorized by federal law and regulation to consider an applicant's existing salary in some circumstances when setting a new employee's starting salary. In North v. United States, the court upheld a salary discrepancy between the plaintiff, a female attorney hired at the GS-14 level by the Department of Education, and a man who was also hired as a GS-14 attorney. The court concluded that the pay disparity did not violate the Equal Pay Act because it was based on the male attorney's "superior" qualifications and prior salary. Although the plaintiff also had superior qualifications -- meaning that she and the male attorney were both considered "highly qualified" for the position -- her starting salary exceeded her prior salary, so her pay was set at the lowest step of the GS-14 pay grade. The male comparator's salary, by contrast was set at the highest step of the GS-14 pay grade (almost $30,000 above the minimum), and even that rate, he made less than in his previous job.

Although there seems to widespread concern about the potentially discriminatory effects of relying on prior salary, there also seems to be a recognition that salary history information has legitimate uses. At a minimum, new laws prohibiting salary inquiries may discourage employers from relying on an applicant's salary history as a default starting point for a salary negotiation. In this regard, employers may be required to determine the approximate salary range for a prospective employee based on the position being filled and the market value of the applicant's job-related skills and qualifications. Within that range, however, an applicant might still be able to use his or or her prior salary as a bargaining chip to try to negotiate for higher starting pay.

This blog reflects the views solely of its author. It is not intended, and should not be regarded, as legal advice on how to analyze any particular set of facts.

Thursday, April 20, 2017

Hively v. Ivy Tech Community College: Implications for Transgender Bathroom Access

Likely to be overlooked as LGBT advocates celebrate Hively v. Ivy Tech Community College are the clear implications for transgender bathroom access.

LGBT advocates have argued that designating bathroom access on the basis of biological sex rather than gender identity constitutes unlawful sex discrimination against transgender individuals. In making this argument, advocates have relied almost exclusively on the Supreme Court's decision in Price Waterhouse v. Hopkins and on lower courts interpreting that decision in holding that discrimination against a transgender individual for being transgender constitutes impermissible sex stereotyping in violation of Title VII. 

For Price Waterhouse to provide support for bathroom access based on gender identity rather than biological sex, it obviously must say something more than that it is unlawful to treat biological men better than biological women. The EEOC, for instance, has concluded that, pursuant to Price Waterhouse, Title VII's prohibition against sex discrimination necessarily encompasses more than discrimination based on biological sex and must encompass discrimination based on "gender": 
That Title VII's prohibition on sex discrimination proscribes gender discrimination, and not just discrimination on the basis of biological sex, is important. If Title VII proscribed only discrimination on the basis of biological sex, the only prohibited gender-based disparate treatment would be when an employer prefers a man over a woman, or vice versa. 
In Hively, however, the majority clearly rejected this far-reaching interpretation of Price Waterhouse, holding that unlawful sex stereotyping merely involves discrimination on the basis of the "victim's biological sex (either as observed at birth or as modified, in the case of transsexuals)" -- in other words, treating a masculine biological man better than a masculine biological woman.

All of this is not to say that transgender bathroom access is necessarily outside the scope of Title VII. Only that it is not supported by the current case law, and advocates would be foolish not to change tacks. I've made this argument before, including in this post, as I had thought it already crystal clear that relying on Price Waterhouse to support transgender bathroom access is a non-starter. Now, with Hively's explanation that sex stereotyping merely involves discrimination based on biological sex, let us hope that LGBT advocates finally see the light.

This blog reflects the views solely of its author. It is not intended, and should not be regarded, as legal advice on how to analyze any particular set of facts.

Sunday, April 16, 2017

LaPoint v. Family Orthodontics: When is it lawful to rescind a job offer after learning the offeree is pregnant and will need leave?

The case of LaPoint v. Family Orthodontics, A15-0396 (Minn. Apr. 5, 2017), illustrates the thin line between what's prohibited and what's not when it comes to the protection of pregnant workers. In this case, the Supreme Court of Minnesota looked at whether the defendant violated the Minnesota Human Rights Act by rescinding a job offer to Nicole LaPoint after finding out that she was pregnant and would be wanting 12 weeks of maternity leave when she gave birth.

Friday, April 14, 2017

Hively v. Ivy Tech Community College: The Dissent and the Concurrences

Following up on my previous post discussing aspects of the majority decision in Hively v. Ivy Tech Community College, this post focuses on the dissent by Judge Diane Sykes and the two concurrences by Judge Richard Posner and Judge Joel Flaum.

Wednesday, April 12, 2017

Hively v. Ivy Tech Community College: Some Lessons from the Majority Decision

The Seventh Circuit's en banc decision in Hively v. Ivy Tech Community College is the first decision by a federal court of appeals to hold that Title VII of the Civil Rights Act of 1964 protects individuals against discrimination based on sexual orientation. In this post, I focus on a few important points about the majority decision by Judge Diane Wood that help place Hively in context: 1) Title VII only prohibits sexual orientation discrimination that constitutes sex discrimination between men and women; 2) sex stereotyping violates Title VII because it discriminates between men and women; and 3) religious organizations with religious objections to homosexuality may be permitted by Title VII to discriminate against gay men and lesbians.

Wednesday, April 5, 2017

Hively v. Ivy Tech. Community Coll.: No, the Seventh Circuit did not expand the coverage of Title VII

Yesterday, in Hively v. Ivy Tech Community College, the United States Court of Appeals for the Seventh Circuit became the first federal appeals court to rule that Title VII of the Civil Rights Act of 1964 prohibits sexual orientation discrimination. This is a groundbreaking decision.

Significantly, the court did not expand the scope of Title VII. It has no authority to do so. It merely interpreted the term "sex," and concluded that sexual orientation discrimination necessarily means treating someone differently because he is male or because she is female.

The easiest way to understand this is to imagine an employer considering whether to hire a female applicant who happens to be married to a man. Then imagine the exact same scenario except change the sex of the applicant to male. If the employer would hire the first individual but not the second, that is sex discrimination, because the only reason for the different result is the applicant's sex. That's what sexual orientation entails -- straightforward sex discrimination.

We'll be hearing a lot about the Hively decision.

This blog reflects the views solely of its author. It is not intended, and should not be regarded, as legal advice on how to analyze any particular set of facts.

Tuesday, April 4, 2017

Dindinger v. Allsteel: The Equal Pay Act and Economic Conditions

With today being Equal Pay Day, I thought I'd highlight the Eighth Circuit's decision in Dindinger v. Allsteel, Inc., No. 16-1305 (Apr. 3, 2017). In this case, a jury found in favor of three female plaintiffs on their pay discrimination claims, but the defendant argued on appeal that it was entitled to a new trial because the district court "incorrectly instructed the jury that Allsteel could not rely on economic conditions to establish its affirmative defense that a factor other than sex justified the pay discrepancies between the plaintiffs and their male comparators."