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Employers Can’t Pay Women Less Because of Their Salary History, Rules Appeals Court

When Aileen Rizo, a math consultant in Fresno County, California, discovered in 2014 that she was making $10,000 less than less-experienced male colleagues who were doing the same work, she filed a lawsuit against her employer; Rizo sued the Fresno County Office of Education (FCOE), on the basis that the difference in pay constituted a violation of the Equal Pay Act. The FCOE’s defense? They justified their decision to pay Rizo less than her male colleagues based on the fact that her previous salary — from her previous employer — had been considerably lower than that of her new colleagues, and they claimed their decision had nothing to do with her gender.
Judge gavel
Image Credit: Pexels / pixabay.com

Rizo’s case was based on the idea that using salary history to calculate current wages “perpetuates existing pay disparities and undermines the legislative intent of the Equal Pay Act, which is to address pay inequity based on sex,” according to the American Association of University Women.

In April of 2017, the U.S. Court of Appeals for the Ninth Circuit sided with the FCOE, and ruled that, “using prior salary alone to calculate current wages can be permissible under the Equal Pay Act as a ‘factor other than sex’ if the defendant shows that its use of prior salary was reasonable and effectuated a business policy.”

Today, however, the U.S. Court of Appeals for the Ninth Circuit overruled that decision, deciding that, “employers cannot justify paying a woman less than a man doing similar work because of her salary history.”

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As reported by The Washington Post:

“The Equal Pay Act stands for a principle as simple as it is just: Men and women should receive equal pay for equal work regardless of sex,” wrote Judge Stephen Reinhardt in the opinion. “The question before us is also simple: Can an employer justify a wage differential between male and female employees by relying on prior salary? Based on the text, history and purpose of the Equal Pay Act, the answer is clear: No.”

The case of Rizo v. Fresno County Office of Education combines two issues we feel passionately about at PayScale: the Gender Pay Gap and the salary history question.

If you’d like to help fix the Gender Pay Gap problem, join us Tuesday, April 10 – online or in person – for Equal Power Day at PayScale HQ.

The Gender Pay Gap

According to PayScale data, women are paid, on average, 77.9 cents for every dollar earned by men. As explained in our 2018 report on the Gender Pay Gap, “In other words, the median salary for women is roughly 22 percent lower than the median salary for men.” (This number was calculated using PayScale’s proprietary data, and the size of the gap can vary slightly depending on the data set used. That said, regardless of the data set used, there is a gender pay gap.)

And even if compensable factors are taken into account – factors like job, experience level, industry type or job level – women still make less than equally-qualified men on average, 97.8 cents for every dollar. (This explains the difference between the uncontrolled gender pay gap and the controlled gender pay gap, which we detail in our new report.)

Again, from The Washington Post:

“Economists say the gender wage gap boils down to career choice, breaks in work for maternity leave and child care — mothers in the United States still bear a disproportionate amount of the child-rearing burden — and insidious forms of discrimination, such as assumptions that mothers won’t be as dedicated to their jobs.”

As women are likely to be underpaid, if they leave a job where they were underpaid and move to an organization that bases their compensation strategy on prior salary information, they’re likely to continue to be underpaid. And every subsequent raise only makes the problem worse.

As explained in our post Women in Tech Are Not Immune to the Gender Pay Gap:

“Over time, if women are asking for or receiving a raise based on a percentage of their salary, the problem is exacerbated; assuming the standard three percent annual raise… three percent of 90-something cents on the dollar isn’t going to eventually equal pay equity; it’ll just mean that, again, the problem gets worse over time.”

If you’d like to help fix the Gender Pay Gap problem, join us Tuesday, April 10 – online or in person – for Equal Power Day at PayScale HQ.

The Salary History Question

If you’ve ever interviewed for a new job, it’s likely that the most uncomfortable part of the interview was when the interviewer asked you how much money you are currently making, or how much you made at your last job. The problem is, answering this question may suppress your salary, as it did for Aileen Rizo; the Fresno County Office of Education used her salary history – and the fact she had been making less than her new colleagues in her past job – to underpay her.

Basing a new hire’s salary on what he or she made at previous jobs could potentially cost that employee thousands – if not hundreds of thousands – of dollars in wages over a lifetime, and the perseverance of the gender pay gap is often attributed – at least partly – to this practice.

You can learn more about this issue in PayScale’s report, Is Asking for Salary History … History?

A Sign of Things to Come?

Between the date Rizo filed suit and today, Massachusetts, California and New York City have passed laws that block managers from requesting an applicant’s prior salary for precisely the reason that it perpetuates unfair pay practices, including the gender pay gap.

Today’s ruling by the U.S. Court of Appeals for the Ninth Circuit further illustrates that the market value of an employee is not based upon what he or she made at past jobs. Rather, it’s based upon what workers in the same job, who possess a similar skillset and experience level, are making in the same labor market … regardless of all else, including whether that employee is a man or a woman.

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