Monday, March 18, 2019

7th Circuit Holds Salary History Can Explain Disparate Pay

Differences continue to exist among federal courts as to whether use of salary history is a gender-neutral basis to justify salary differences between male and females doing the same job. The federal Equal Pay Act prohibits unequal pay for the same work based on sex. Many argue, and some courts agree, that because women continue to earn less than men for the same work (the gender gap), to allow employers to base wages on the candidate’s salary history only perpetuates the sex-based pay disparity and should not be lawful.

The most recent notable case supporting the argument against use of wage history came out of California. In Rizo v. Yovino, which has been the subject of a few posts here, the court of appeals ultimately ruled that the school district who hired plaintiff in that case violated the Equal Pay Act when it paid her as a teacher significantly less for the same work than male teachers because the school district based pay on salary history.  The U.S. Supreme Court took the case on appeal but dismissed it because the court of appeals judge who wrote the decision and was part of the majority (but not unanimous) vote, died before the decision issued. Dismissal of the case means that different federal circuits can rely on the precedent in their own circuit to decide whether salary history can lawfully be used to set salaries, even if it perpetuates pay disparity between sexes.

We jump back to the 7th circuit; which covers all of Illinois and some of Indiana and Wisconsin and is known as one of the more conservative and employer friendly courts of appeals. Last week it affirmed its consistent holding that using salary history to set pay is not a violation of the Equal Pay Act because it is not a criterion based on sex.

In Hubers v. Gannett, the plaintiff sold advertisement for USA Today, owned by Gannett. Her pay wasn’t shabby, earning a base at the time that she left of $137,000 with the ability to earn another $135,000 if she met all of her sales goals. The problem was that a male employee who had previously worked in the sports advertising division was transferred to a position identical to hers after the sports ad division closed. While in the other job, his base salary was $190,000 with the ability to earn more if he met sales goals. Gannett did not adjust his salary when he was transferred to the same position as plaintiff, nor did they increase plaintiff’s salary to be the same as his. Ultimately, and for a number of reasons in addition to the pay disparity, plaintiff quit and sued the company for, among other things, violation of the Equal Pay Act.

The company responded, in part, that the male employee was simply kept at his previous salary to avoid morale problems that often occur when an employee’s salary is reduced. In other words, the company maintained his salary based on his pay history. Plaintiff argued that because their positions were identical, the fact that he was placed at a higher salary violated the Equal Pay Act.

Relying on 7th Circuit precedent, the court held that employers can cite salary history to explain pay disparities between male and female employees and case law does not require employers to increase the pay for women when salary discrepancies between sexes are based on prior compensation. The court stated that “prior salary alone…is sufficient to support a pay differential.”

Until the U.S. Supreme Court has another opportunity to address this issue, employers should be aware of two things. Nationwide companies may be subject to different interpretations of the use of salary history in different jurisdictions. Secondly, many local governmental units, like the City of Chicago, have enacted ordinances which ban employers from inquiring about salary history. While use of salary history to set pay may be lawful in the 7th Circuit’s jurisdiction, in some places within those boundaries it is unlawful to ask about salary history.