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Can an employer consider prior salaries in setting pay rates?

The Ninth Circuit court in Rizo v. Yovino held recently that an employer cannot pay a female employee less than a male employee for the same work simply because the female employee made less money in a prior position. This holding changed the court's prior ruling and changed the law in a way that is designed to  eliminate gender-based pay gaps.

Aileen Rizo was a math consultant with the Fresno County public schools and she sued the County under the federal Equal Pay Act ("EPA") and other laws after she discovered that the County paid her male colleagues more for the same work. It was agreed that she received lower wage than her male colleagues for equal work, but the County claimed the differential was permissible under the EPA because it was based on "a factor other than sex," namely Ms. Rizo's prior salary. The District Court rejected the County's argument, and the Court of Appeal revered, holding the employer could rely on prior pay to justify a lower salary.

The Ninth Circuit reviewed the decision, and on April 9, 2018, reversed its prior decision. This holding is important because it helps employees understand that their salary history is not a factor for purposes of the Equal Pay Act. In other words, employers cannot rely on an applicant's prior salary history to justify paying one employee differently than another employee of the opposite sex for similar work.

California recently passed AB 168, which restricts the employer's ability to gather applicant's salary history information or consider such information when determining whether to offer employment to an applicant and/or what salary to offer. Other states, like Delaware, Massachusetts, and Oregon have passed similar legislation, as have cities like San Francisco, Boston, and Philadelphia.

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