The old saying in law school is that "bad facts make bad law." On bad facts, the Ninth Circuit has issued a puzzling decision on the Equal Pay Act that will have sweeping consequences throughout California, Oregon Washington and the West.
The case, Rizo v. Yovino, et al., involves an admittedly foolish payroll practice in the Fresno County Public schools. Instead of evaluating new hires on the basis of their credentials and past work experience, the County determines a new hire's compensation based on her prior salary in her previous job, adding 5%, and then placing the new employee in the corresponding step of the County salary schedule. This procedure is applied even to employees who were formerly working outside of Fresno County, as was the plaintiff in this case. When she applied for a job in Fresno County, Ms. Rizo received a 5% bump up from her $50,000 salary in Arizona, and then was placed on Step One of the hiring schedule. When she realized that she was being paid significantly less than her male coworkers (who joined the county from positions that paid more) for exactly the same work, she sued under the EPA.
The majority opinion starts out with a remarkably dated assertion that something called the "gender pay gap" is a discriminatory reality that needs to be addressed through the EPA. Of course, modern research has conclusively demonstrated that the gender pay gap is not the result of discrimination, but almost completely the result of life and career choices that result in lower compensation in general for women across all occupations. Nevertheless, and ignoring the fact that the gap represents the result of countless business decisions based on such things as time spent working, time spent in the workforce, occupational choice, and educational degree, the Court determined that this is precisely the type of thing covered by the EPA. The court accordingly ruled that consideration of compensation history is a sex-based decision prohibited by the EPA. Not just prohibited when it is the sole basis for a compensation decision, as it was in Fresno County, but prohibited in any form, and when used in conjunction with any other non-sex-related factors.
The Equal Pay Act straightforwardly says that men and women working in the same jobs should be paid the same unless the differences in compensation are based on factors other than those related to sex. Typically, differential factors have included the types of things that businesses use to measure value of an employee-advanced degrees, educational level, job skills, experience, etc. In this context, compensation history for an individual competing for a particular job is a fairly straightforward measure of the market value of that individual's qualifications. The idea that an economy-wide "gender gap" which is not based on discrimination, but a host of other factors, should provide the basis for such a wide-ranging decision excluding past economic compensation from a hiring decision is ludicrous. But the Ninth Circuit has, as we say in the business, drunk the Kool-Aid of political correctness and the unassailable victim status of women in this economy.
As the concurring opinions point out, the Court majority ignores the fact that compensation history is a highly individualized aspect of a person's employment qualifications. An employer is not hiring a generic woman with a $.20 per hour shortfall in her wage-earning history measured against her male cohort. An employer is hiring an individual, with job qualifications and a work history unique to her. Among those qualifications is the assessment of the value of her skills by previous employers, as indicated by her wage history. Invalidating any inquiry into that based on such a sloppy analysis is cause for alarm.
So what does this decision mean for employers? Well, in the Ninth Circuit, it makes it illegal to ask any questions related to employment compensation history. To the extent employers are asking such questions, they should stop, now. Of course, liability does not attach as a result of asking such questions, but only if such questions are accompanied by differences in pay scale between men and women performing the same job. But such differentials are not uncommon given varying qualifications and experience levels; for now, any reference or use of compensation history in the original hiring decision will create strict liability for an employer.
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