The underlying principle makes sense in theory -- women's wages have been depressed historically, so reliance on salary history perpetuates sex-based pay discrimination. By adopting a per se rule that salary history can never be used as a defense under the EPA, however, the Ninth Circuit has clearly gone too far. A female applicant, for example, could be currently earning more than a male applicant with similar qualifications, so relying on pay history in such a case presumably would not be sex discrimination yet still would not qualify as a factor other than sex under the Ninth Circuit's reasoning.
The elephant in the room has always been salary negotiations, and this is where the Ninth Circuit has made its most egregious error. If a job applicant voluntarily reveals his or her salary history to bargain for higher starting pay, should it be legal for the employer to take that information into account? How can employers compete for the best talent if they cannot entice applicants to leave their current employers by offering to beat, or at least match, what applicants are currently earning?
In the Ninth Circuit's previous en banc decision, which was vacated by the Supreme Court, the Ninth Circuit side-stepped this issue:
We do not decide, for example, whether or under what circumstances, past salary may play a role in the course of an individualized salary negotiation. We prefer to reserve all questions relating to individualized negotiations for decision in subsequent cases.In the Ninth Circuit's new decision, rather than leave this issue open, it has tackled it head on:
Our holding prevents employers from relying on prior pay to defeat EPA claims, but the EPA does not prevent employers from considering prior pay for other purposes. For example, it is not unusual for employers and prospective employees to discuss prior pay in the course of negotiating job offers, and the EPA does not prohibit this practice. Certainly, our opinion does not prohibit this practice. But whatever factors an employer considers, if called upon to defend against a prima facie showing of sex-based wage discrimination, the employer must demonstrate that any wage differential was in fact justified by job-related factors other than sex. Prior pay, alone or in combination with other factors, cannot serve as a defense.
. . . The statute places no limit on the factors an employer may consider in setting employees’ wages, but it places on employers the burden of demonstrating that sex played no role in causing wage differentials.Yes, that's right, the Ninth Circuit has taken the position that it doesn't violate the EPA for an employer to take sex into account when setting pay. It merely prohibits employers from relying on sex to justify pay differentials.
First of all, this conclusion is flatly contrary to the EPA, which prohibits paying opposite-sex workers in the same job unequal wages unless the differential is based on a factor other than sex. If salary history is never a non-sex factor, as the Ninth Circuit has held, then it is an EPA violation for an employer to rely on it when negotiating a prospective employee's starting salary.
Second of all, it makes little sense to say that it is lawful for an employer to rely on prior pay (or any other sex-based factor) in setting pay but then say that the employer may not rely on that factor if it is later sued by someone who says he or she is paid less than someone of the opposite sex in the same job. Despite proclaiming its intention to prevent the perpetuation of sex-based pay discrimination, the Ninth Circuit has concluded that sex-based pay discrimination is not itself a violation of the EPA, only that an employer will not be able to defend itself if an employee can establish a prima facie case.
If the Ninth Circuit really thinks that prior salary is always tied to sex, then it must acknowledge the implications -- an employer cannot rely on salary history even if it is raised voluntarily by an applicant in the context of salary negotiations. The Ninth Circuit cannot have it both ways.
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.