Salary history cannot justify sex-based pay gaps - U.S. appeals court

By Robert Iafolla

(Reuters) - A U.S. appeals court on Monday ruled employers cannot use workers' salary histories to justify gender-based pay disparities, saying that would perpetuate a wage gap that is "an embarrassing reality of our economy."

An 11-judge panel of the San Francisco-based 9th U.S. Circuit Court of Appeals ruled unanimously that California's Fresno County could not pay a female math consultant, Aileen Rizo, thousands of dollars less than male colleagues who did similar work because of her salary history, reversing a decision from a smaller panel last year.

Congress outlawed pay discrimination based on gender in the federal Equal Pay Act in 1963.

"At the time of the passage of the (EPA), an employee's prior pay would have reflected a discriminatory marketplace that valued the equal work of one sex over the other," Circuit Judge Stephen Reinhardt wrote. "Congress simply could not have intended to allow employers to rely on these discriminatory wages as a justification for continuing to perpetuate wage differentials."

Reinhardt died late last month after more than 37 years on the 9th Circuit bench.

Rizo's lawyer, Daniel Siegel, said the decision is an important ruling that will benefit women who have been paid less because of past salary inequities.

Michael Woods, a lawyer for Fresno County, said in a statement the county used an objective, gender-neutral policy for setting teacher's pay and will challenge the ruling at the U.S. Supreme Court.

Rizo sued after she discovered in 2012 that her male coworkers were paid more than her, about three years after she started working for Fresno County.

The county said Rizo was paid less than her male counterparts based on her prior salary history, which was a valid "factor other than sex" allowed under the EPA.

In Monday's ruling, the 9th Circuit said salary history cannot be used, whether alone or with other factors, to justify gender-based pay gaps. Only legitimate, job-related factors, such as a prospective employee's experience, training, education or prior performance, can justify gender-based pay disparities under the EPA, the court said.

Prior salary is a "second-rate surrogate" for those job-related factors and likely masks continuing pay inequities, the court said.

Women made 82 cents for every dollar earned by men in 2016, according to U.S. Labor Department data.

(Reporting by Robert Iafolla; Editing by Alexia Garamfalvi and Chris Reese)