On April 9th, in Rizo v. Yovino, the Ninth Circuit Court of Appeals reversed itself and ruled that an employee's prior salary does not constitute a "factor other than sex" which can support a pay differential between a male and female employee performing comparable jobs. This is an important change in the law, and increases the risk for potential liability under the federal Equal Pay Act.

In Rizo, the plaintiff employee was hired by defendant employer as a math consultant. Prior to being hired by defendant, she worked in Arizona.  Her employer used a salary schedule to set the salaries of new employees. Under the schedule, defendant considered the employee's most recent prior salary and then placed the employee on the step that corresponds to his or her prior salary, plus 5%. This process put plaintiff on the lowest salary tier. During lunch with her colleagues, all of whom were male, plaintiff learned that they were all paid more than she was. She sued her employer for violation of the Equal Pay Act. The court originally ruled last year that the employer was permitted to consider the employee's prior salary in setting her initial salary. However, the employee appealed to the full Court of Appeals, which reversed the decision, writing: 

"We now hold that prior salary alone or in combination with other factors cannot justify a wage differential. To hold otherwise - to allow employers to capitalize on the persistence of the wage gap and perpetuate that gap ad infinitum - could be contrary to the text and history of the Equal Pay Act."

Pay equity laws recently passed by both Oregon and Washington on the state level prohibit an employer from justifying pay levels on prior wage history. Moreover, Oregon's law prohibits an employer from even asking an applicant about prior salary before the employer makes an offer of employment that contains compensation amounts.

Pay equity continues to be a focus in employment law, and every employer should be carefully reviewing pay rates, pay scales, job descriptions, hiring practices and promotion practices to ensure compliance with both state and federal law and minimize potential liability. The employment lawyers at Farleigh Wada Witt can assist you in both complying with these important laws before problems arise and addressing pay disputes. If you have any questions about pay equity, please call Kim McGair, Kelly Tilden or Trish Walsh at 503. 228.6044.