Federal Court Casts Doubt on the Use of Salary History in Pay Decisions

Sunday July 1, 2018 Published in Corporate and Business
Marriage for money. Man and woman have money between them. Separation of property in case of divorce.

It has been over fifty-five years since the passage of the Equal Pay Act. However, numerous sources report that the gender pay gap still persists and employers continue to grapple with this issue when making compensation decisions in light of the ever-changing legal landscape.

The Equal Pay Act requires employers to pay men and women equal pay for equal work. The only exception is for gender-neutral, permissible criteria such as seniority, experience, work performance, or “any other factor other than sex.” It has long been the case that an employee’s salary history was one such “other factor” that employers could safely rely upon in making compensation decisions. Yet, that is beginning to change.

In April 2018, the Court of Appeals for the Ninth Circuit, which covers California and other western states, held that basing a woman’s salary on her past earnings is itself discriminatory and perpetuates unequal pay. In so ruling, the Ninth Circuit expanded the holdings of the Tenth and Eleventh Circuits, which previously held that employers could not base salary decisions on salary history alone, but instead needed additional permissible factors. These decisions, along with the fact that several states and cities across the country including Delaware and Pittsburgh, have banned employers from asking job candidates about their salary history and indicates that the law may be changing in order to address gender pay disparity. The Court of Appeals for the Sixth Circuit, which covers Ohio, has not yet ruled on this issue.

In light of this growing trend, Wegman Law is encouraging our clients to reevaluate their employee pay policies and practices and make any needed changes to ensure fair and equitable compensation within their workplaces—irrespective of individual employees’ former salary histories. Wegman Law can assist employers with rewriting their pay policies and conducting pay audits to identify potential pay differences and determining whether those differences are justifiable under the current legal framework.

For more information on this topic, or if you have questions about your workplace policies and procedures, please contact David R. Knowles drknowles@wegmanlaw.com or Jessica L. MacKeigan at jlmackeigan@wegmanlaw.com.

Wegman Hessler specializes in business law for business leaders, applying legal discipline to solve business problems to help business owners run smarter. For more than 50 years, this Cleveland business law firm provides full-service strategic legal counsel for closely held businesses. Learn more at www.wegmanlaw.com.

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