Can Prior Salary Levels Reflect Underlying Sex Discrimination?

What if prior salary is based on gender?

A hot issue nationally is whether setting a new unequal salary level between the sexes on the new hire’s historical salary level is legitimate because it is “any other factor other than sex.” While it literally is another factor – prior salary – the concern is that if women’s salaries continue to be based on their previous salaries, a historical pay disparity based on discrimination – either for an individual or because of a pattern or practice of lower salaries or wages for female employees as a group – will be perpetuated if future pay is lower than that received by males doing the same work because it is based on past discriminatory pay patterns.

In other words, while it is literally a factor other than sex, in practice, past salary is just a stand-in for a factor that is based on sex.

Salary history disclosure bans

This is enough of a concern that some state and local governments across the country have made inquiries about past salary in a legislative attempt to narrow the pay gap between the genders. For example, most Louisville/Jefferson County Metro Government agencies or departments may not ask job applicants about their salary histories (but there is no statewide Kentucky ban as of this writing).

Federal courts disagree

However, the federal circuit courts are split on the question under the Equal Pay Act, and a California school district employer has asked the U.S. Supreme Court to decide the issue, in which case the decision would apply nationally to Equal Pay Act cases (and likely to unequal pay cases under Title VII’s mandate against sex discrimination).

The Rizo case

In Fresno County Superintendent of Schools v. Rizo, the district hired plaintiff Rizo as a math consultant, for which her starting salary was set 5% higher than her previous salary. The district, in its Supreme Court petition for certiorari, explained that the district considered this practice neutral and objective, and guaranteed a raise to all new workers.

When Rizo learned three years later that she was making less than her male colleagues, she sued the district. Eventually, the suit ended up before the U.S. 9th Circuit Court of Appeals, which held that an employer could never use prior salary to set a new salary under the Act. The defendant school district employer then filed the current petition with the highest court.

Three other circuits say that past salary may always be considered, and four others allow consideration sometimes. For example, the 6th Circuit, which includes Kentucky, says that past salary may only be used to set unequal salary levels if there is a “legitimate business reason.”

The Supreme Court may well decide to grant the petition and take on this important issue. This would provide guidance to employers in developing policy and procedure in setting pay levels that would comply with federal law.