All California employers have a legal responsibility to pay wages and salaries in nondiscriminatory fashion. We recently published a post about a new California law that took effect on January 1, 2018, that forbids employers from asking new hires - either orally or in writing - about their past salary levels or wage amounts.
Under the new law, an employer not only may not ask about past salary, but also may not use a past salary level as the basis of a hiring decision or a new starting wage. The idea behind the law is that because a past salary level could have been based on illegal discrimination such as because of gender, using that past salary to make future employment decisions at a new employer would just perpetuate the discriminatory gap in pay from one job to the next. San Francisco also prohibits this practice by city ordinance.
Equal Pay Act of 1963
It has long been federal law under the Equal Pay Act (EPA) that an employer may not pay different wages to men and women for performing substantially the same jobs. On April 9, the U.S. Court of Appeals for the Ninth Circuit, the federal circuit that includes California, handed down a significant decision called Rizo v. Yovino that interprets the EPA in a way that is similar to the new California law.
Rizo, the plaintiff, said that the Fresno school district violated the EPA when it paid her a lower wage than her male counterpart based on her prior salary for similar work in Arizona. The case was appealed to the Ninth Circuit, which agreed with Rizo.
The EPA says that different wages can only be justified based on seniority, merit, production levels or "any other factor than sex." Prior opinions in the Ninth Circuit have said that previous salary is an acceptable "other factor than sex" that could form the basis for lower salaries between genders, reports a comprehensive article in Vox. (This article also links to the new case.)
The Ninth Circuit reversed its prior decisions interpreting the EPA, finding that the "gender pay gap" would be perpetuated if the gap could be transferred from job to job, never allowing a woman to catch up to her male peers for equivalent work. The court wrote that the "catch-all" of "any other factor than sex" only includes factors that are "job-related" and that prior salary is not legitimately related to the new job. Rather, prior salary can be indicative of illegal discrimination.
With these new laws, it is imperative that California employers do not inquire about or use past wages as the basis of a hiring decision or a new starting wage, or to justify paying women and men differently. If you have any questions about equal pay issues, our qualified employment law experts are available to help you.