As an employer, does your current employment application form or online application process ask applicants to provide their current rate of pay? If so, your application and salary determination process may be in need of an update.
On July 2, 2020, the Supreme Court of the United States declined to consider the case of Rizo v. Yovino, from the Ninth Circuit Court of Appeals wherein that Court found that an employer effectively violates the federal Equal Pay Act when it uses a pay structure based on prior wages because such a system will “perpetuate a discriminatory wage disparity between men and women.” For example, in 2018 (the most recent year for which the federal government has released data), stats showed that women generally are paid about 18% less than men, or stated another way, females earn 81.6 cents for every dollar earned by males. (2018, U.S. Census Bureau).
The EPA prohibits wage discrimination on the basis of sex, but an employer may ask about an applicant’s salary requirements and utilize objective, non-discriminatory measures. Under the EPA, it is illegal for employer to pay unequal wages to men and women who perform substantially equal work. Employers may avoid liability for such pay differentials that might otherwise be prohibited only when they can establish that the wage disparity is justified by seniority, a merit system, quantity or quality of production, or a factor other than sex. In order to defend an action under the EPA, an employer must be able to prove one of these four reasons. In the Rizo case, the Court held that prior salary is not a legitimate “factor other than sex” and such a differential must be based on job-related factors, such as experience, education, or prior job performance.
Current case law is not uniform on this issue, and while the SCOTUS may find a case suitable to resolve the conflict among the circuit courts, for now - employers would be wise to audit their pay practices so as to avoid relying on prior wages or salaries and instead be sure such decisions are pursuant to a “factor other than sex.”