In hiring employees, can you just give them a salary bump or must you look at their soon-to-be coworkers to decide the correct amount? This is a hotly debated issue right now, and, as with many things, it depends on where you live. In Rizo v. Yovino, Fresno County Superintendent of Schools, the Ninth Circuit (which covers the West Coast) ruled that an employer could not consider salary history. Although not all courts agree on this point, this week the U.S. Supreme Court declined to take the appeal, denying certiorari, and leaving the Ninth Circuit’s decision in place.

How Did We Get Here?

In this current case, in 2009, the Fresno County Office of Education hired Aileen Rizo as a math consultant and, like it did for all employees, set her salary by adding 5% to her last salary. When she learned she was making less than male colleagues hired after her, she filed a complaint under the Equal Pay Act and various state laws. For more details on Ms. Rizo’s case, read our prior blog post.

After a circuitous route (which included a trip to the Supreme Court in light of one of the judges dying before a decision was released), Ms. Rizo’s fate was still up in the air. In February 2020, the Ninth Circuit again ruled in her favor, holding that a “factor other than sex” had to be job related and her prior salary was not. While many courts have ruled similarly to the Ninth Circuit, some have read the “factor other than sex” defense more broadly.

At least for now, the Supreme Court is not going to clear this up.

Now What?

It is not uncommon for an employer to set a new employee’s pay by looking at his or her prior salary and increasing it some. Some people argue that is smart economically and relies on a “factor other that sex.” Others, including the EEOC, argue that this practice results in a pay gap between men and women performing the same job. You should re-evaluate this practice as it could land you in court. Here are a few tips:

• Check your jurisdiction to see if you can consider prior salary as a “factor other than sex.”
• Check your state and local laws, as many now prohibit inquiries about prior salary.
• Consider doing a pay equity audit (with the assistance of counsel) to identify if you have a ticking time bomb just waiting for the right plaintiff to come along.