Do Salaries Speak Louder than Words?

So, you’re looking to move on from your current position and your friend, who happens to be of the opposite sex, encourages you to apply for a position with her/his employer.  Your friend finds the work to be rewarding and discloses that s/he is paid an impressive salary.  You clear the first hurdle and get an interview, and one of the first questions you are asked concerns your current salary.  You then get an offer, and the quoted salary is only marginally higher than your current one.  It may be time to Google “find a lawyer near me.”

In a nutshell, the Equal Pay Act prohibits an employer from paying employees of one sex less than it pays employees of the opposite sex for “equal work” performed with the same skill, effort, and responsibility, and under the same conditions.  The Act provides for exceptions, however, where disparities are due to a (1) a seniority system; (2) a merit system; (3) a system which measures earnings by quantity or quality of production; or (4) a differential based on any other factor other than sex.  The prevailing view – adopted by the EEOC and several federal courts – is that consideration of prior salary is permissible under the Equal Pay Act as long as it is not the only factor in the decision to offer a particular salary to a new employee.

The 9^th Circuit recently split from the majority rule that prior salary can be “a factor other than sex” in certain circumstances and held that the Act forbids any consideration of prior salary when setting initial wages.  If you live in the 9^th Circuit, this means no longer having to worry about your current income holding you back if you look for other employment—at least for the time being.

The strongly worded decision, authored by the late Judge Reinhardt, unapologetically acknowledged its departure from the more widely agreed upon interpretation that prior salary may be considered so long as it is not the only factor.  The decision was issued just in time for Equal Pay Day—the day which symbolically marks the additional time women must work in order to make the same salary as male workers based on wage disparities from the prior year.  Notably, this date does not reflect the wider wage gap for women of color.

Relying on legislative history and statutory interpretation, the majority opinion unpacked the fourth exception and explained that it found it to be intended strictly related to “job related” factors (specifically distinguishing “job related” from “business related”) and that “[p]rior salary, whether considered alone or with other factors, is not job related and thus does not fall within an exception to the Act that allows employers to pay disparate wages.” (emphasis added)  The court did include a disclaimer that the use of prior salary in “individualized salary negotiation” after the initial salary was set would not be a violation of the Act, noting that it “prefer[ed] to reserve all questions relating to individualized negotiations for decision in subsequent cases.”

Yet, although it was in agreement on the outcome, the court was divided.  The decision includes three separate concurring opinions which point to decisions in the Second, Eighth, Tenth, and Eleventh Circuit, as well as a statement by the EEOC in its amicus brief, in support of the prevailing position that prior salary may be relied upon when considered as “part of a mix of factors.” The concurring judges objected that the employer in this case relied solely on prior salary, so consideration of the prevailing view was unnecessary.  “Not only does [the plaintiff’s] case not present this issue,” opined Judge McKeown, “but this approach is unsupported by the statute, is unrealistic, and may work to women’s disadvantage.”  When federal appeals courts reach different conclusions on an issue, the Supreme Court is likely to become the final decision.  The divide on this issue does not bode well for the future of the 9^th Circuit’s decision.

What are the practical implications in the meantime?  It depends.  At the moment, job-seekers in states under the purview of the 9^th Circuit are protected from an employer relying on their prior salary in determining an initial salary offer.  Yet employees outside of the 9^thCircuit are not completely without recourse when an employer utilizes prior salary with other factors and relies on the “other factor other than sex” defense.  Additional protections may be available under state law as states such as California and Massachusetts take it upon themselves to limit an employer’s ability even to ask about salary history.  And, as with every case, the answer is dependent on each set of specific facts.

There are also key aspects of the Act that remain true for everyone under its purview: (1) although the Act was a response to systemic underpayment of women, both men and women are protected under the Act; (2) the Act does not require that a plaintiff show that the employer had a discriminatory intent; and (3) candidates still retain the right to use their prior salaries to negotiate a higher salary once the initial offer is made.

As for the significance of the court’s decision, Judge Reinhardt wrote:

Unfortunately, over fifty years after the passage of the Equal Pay Act, the wage gap between men and women is not some inert historical relic of bygone assumptions and sex-based oppression. Although it may have improved since the passage of the Equal Pay Act, the gap persists today: women continue to receive lower earnings than men “across industries, occupations, and education levels.” “Collectively, the gender wage gap costs women in the U.S. over $840 billion a year.” If money talks, the message to women costs more than “just” billions: women are told they are not worth as much as men. Allowing prior salary to justify a wage differential perpetuates this message, entrenching in salary systems an obvious means of discrimination—the very discrimination that the Act was designed to prohibit and rectify.

If you have questions about the Equal Pay Act or appropriate salary considerations in your area and would like to speak with an attorney, call our Washington, D.C. office at 202.331.9260 or complete our online form here.  We represent federal and private sector clients across the country and abroad.