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Equal Pay Act puts legal burden on employers

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Equal pay for equal work. If it seems like the public has been debating this concept for decades, it’s because it’s true. 

Over 50 years ago, the United States enacted the Equal Pay Act of 1963, requiring that employers pay men and women the same pay for substantially equal work. Washington State enacted its own Equal Pay Act two decades earlier in 1943. However, labor statistics continue to show that a wage gap persists between men and women working in substantially similar positions. 

The underlying reasons for the persistence in the wage gap are complicated and subject to an array of social and political arguments. Regardless, employers need to be aware of the state and federal laws that mandate equal pay for their employees performing the same or substantially similar work to avoid legal liability.

The Equal Pay Act creates a type of strict liability for employers because an employee must only show that he or she is receiving a different wage for equal work. The Act works to shift the burden to the employer to prove that the differential in pay is not discriminatory. 

To successfully dispute a violation of the Equal Pay Act, the burden is on the employer to prove that the wage disparity is permitted by one of the statutory exceptions: 1) a seniority system; 2) a merit system; 3) a system measuring the quality or quantity of production; or 4) a differential based on “any factor other than sex.”

An employer’s ability to obtain and use a candidate’s prior salary history in consideration of hiring or setting salary levels is a current hot-button issue in the equal pay debate. Several local and state governments, including Massachusetts, Philadelphia, and New York City, have recently passed laws limiting the ability of an employer to obtain prior salary history from employees or using prior salary history to determine salary and benefits. 

Washington is also considering a bill (House Bill 1533) to prohibit employers from asking applicants about salary history during the interview process, only permitting inquiries about prior salary history once the job has been offered (and the salary set). HB 1533 would also require employers to provide wage scales and salary ranges to employees and applicants upon request.

These legislative developments seem to be in line with many federal circuit court decisions holding that consideration of prior salary cannot be a “factor other than sex” to justify a pay differential between employees performing the same work. In a departure from those federal circuit court decisions, the Ninth Circuit recently interpreted that “factors other than sex” may include consideration of prior salary history so long as the factor “effectuate[s] some business policy” and that the employer “use[s] the factor reasonably in light of the employer’s stated purpose.” See Rizo v. Yovino, 854 F.3d 1161, 1165 (2017).

Rizo was hired as a math consultant for a public school system in Fresno, Calif. After discovering that she was paid a lower salary than her male counterparts in the same position, she filed suit alleging violation of the Equal Pay Act. In defending against the claim, the school system argued that the pay differential between Rizo and her male counterparts was the result of a gender-neutral policy of paying the employee 5 percent more than the employee earned at their previous job.

The district court sided with Rizo, holding that prior salary alone is not a “factor other than sex” permitted by the Act because “ [A] pay structure based exclusively on prior wages is so inherently fraught with risk … that it will perpetuate a discriminatory wage disparity between men and women that it cannot stand, even if motivated by a legitimate non-discriminatory business purpose.” The Ninth Circuit disagreed and reversed on appeal, holding that consideration of prior salary is appropriate if it effectuates a business policy and is reasonable in the application of the employer’s purpose. The Court was persuaded to support the school system’s policy because: 1) it was objective; 2) it recruited quality candidates with the promise of a 5 percent pay increase; and 3) it was consistent and evenly-applied.

Employers should take care to establish compensation policies that are objective, consistent, and reasonably related to legitimate business purposes. Though the Rizo decision seems to keep the door open for employers to consider prior wage history in setting wages for employees, employers in Washington should be cautious when setting compensation policies that rely on obtaining an employee’s prior salary information given the related bill pending in Olympia.

Erin McCool is a Member in the Wenatchee office of Ogden, Murphy, Wallace, PLLC, practicing in the areas of litigation, employment & labor law, and land use & water. She provides advice and consultation to local businesses, employers, and municipalities regarding state and federal employment laws.