The Past Really Is Dead: Ninth Circuit Shuts Door on Use of Past Salary as “Factor Other Than Sex” Under the Equal Pay ActIn setting a new employee’s pay, what do you consider? Past experience? Check. Education? Check. Salary at the last job? Not so fast. In a recent Ninth Circuit decision, the court framed the question as follows:

Can an employer justify a wage differential between male and female employees by relying on prior salary?

The court said not just no, but heck no and overturned a 1982 case that suggested otherwise.

The Facts

In 2009, the Fresno County Office of Education hired Aileen Rizo as a math consultant. In setting her salary, Fresno County applied Standard Operating Procedure 1440 (SOP 1440) that dictated a new hire’s salary was set by adding 5 percent to that person’s prior salary, and then using that amount to put him or her in the salary schedule. This is how Fresno County set everyone’s salary—regardless of race or sex or anything else.

A few years later, Ms. Rizo was talking with her coworkers and found that her male colleagues hired after she was hired were making more money. Suffice it to say, she was not happy about that and filed a complaint. Fresno County responded that they were setting everyone’s salary the same way and, in fact, this process placed more women in higher compensation steps than men. Still not happy, Ms. Rizo filed a lawsuit under a number of state and federal statutes, including the federal Equal Pay Act (EPA).

The Law

The EPA provides that no employer shall discriminate between employees on the basis of sex

“by paying wages to employees . . . at a rate less than the rate at which he pays wages to employees of the opposite sex . . . for equal work on jobs the performance of which requires equal skill, effort, and responsibility, and which are performed under similar working conditions. . . .”

Unlike Title VII, the EPA does not require a plaintiff to show that the employer intended to discriminate. Instead, the plaintiff need only show that she is doing the same job as a male employee (and she only needs to have one male comparator) but is paid less. If the plaintiff can establish those facts (and that is not always easy), the employer must prove one of four affirmative defenses. In this case, the relevant affirmative defense was that the pay differential was “based on any factor other than sex.”

Back to Fresno and the Ninth Circuit

Fresno County conceded that it paid Rizo less than her male counterparts. However, it moved for summary judgment noting that SOP 1440’s reliance on an employee’s prior salary was a “factor other than sex” under the EPA. The district court denied Fresno County’s motion but certified it for immediate appeal.

A three judge panel vacated the district court’s decision. The panel held that a prior Ninth Circuit decision, Kouba v. Allstate Insurance Co., had settled the issue back in 1982. Under Kouba, an employer could rely on prior salary as a “factor other than sex.” Ms. Rizo did not take that decision lying down and asked for the entire Ninth Circuit to weigh in.

In an en banc decision, the Ninth Circuit did so, indicating its intent to “clarify the law, including the vitality and effect of Kouba.” It certainly clarified its position, holding that:

“Prior salary alone or in combination with other factors cannot justify a wage differential. To hold otherwise—to allow employers to capitalize on the persistence of the wage gap and perpetuate that gap ad infinitum—would be contrary to the text and history of the Equal Pay Act, and would vitiate the very purpose for which the Act stands.”

That is pretty clear.

Now What?

Some jurisdictions have already prohibited asking about prior salary in an effort to close the gender wage gap and this is more evidence that relying on prior salary is not viewed as gender neutral.

  • Employers in the Ninth Circuit (which covers the entire West Coast) should take any consideration of prior salary out of their matrix. Stick to experience (years and otherwise), education, skills, etc.
  • Employers in other areas of the country should check their state laws and federal circuits to find out if they can rely on prior salary.
  • Finally, employers (with the assistance of counsel) should regularly look at pay data to compare long-term employees versus more recent hires to see if you have a potential problem.

If you have a male employee making more money than a female counterpart, be careful. That is the kind of thing that gets you a lawsuit.

Pay the Man! (Or Woman)—But Differently? 11th Circuit Reinstates Sex Discrimination Pay ClaimWhen you promote someone into a position, do you have to pay him what you paid his predecessor? As with so many things – it depends. Can you pay less if the promotee has less experience and a lower prior salary than the predecessor? Maybe. However, if the new promotee is a female replacing a male make sure you can defend any pay differential under both the Equal Pay Act (EPA) and Title VII. In Bowen v. Manheim Remarketing, the Eleventh Circuit examines just such a pay disparity and concludes that a reasonable jury could find that it was based on sex.

Background

Qunesha Bowen worked for Manheim for three years as a car detailer. In 2005, Manheim promoted her to arbitration manager and gave her a hefty raise — about $6,000 (around 23 percent) —which was about $14,000 below her male predecessor’s salary. She did not catch up to her predecessor’s salary for six years. When she learned of the disparity, she sued for sex discrimination under the EPA and Title VII.

Manheim moved for summary judgment explaining that the pay differential between Bowen and her predecessor was not based on sex. In establishing both its affirmative defense under the EPA and its legitimate nondiscriminatory reason under Title VII, Manheim argued that the predecessor’s longer experience with the company (six years versus Bowen’s three years), prior management and mechanical experience (which Bowen lacked), and his $46,350 salary prior to promotion (as compared to Bowen’s $26,000) justified the pay differential. For her part, Bowen offered evidence that her performance was good, her pay was at the bottom of the pay range and, importantly, testimony from a company Human Resources manager who had reviewed company pay records and concluded that female employees were paid less than their male counterparts. The HR manager also reported conversations she had with Bowen’s supervisors (who set her pay) that suggested a bias against women. For example, she reported that Bowen’s general manager said he would be a “laughing stock” if he hired a female assistant general manager and he would never have a woman work as a mechanic.

The District Court granted summary judgment in favor of Manheim, finding that the company showed the pay disparity was based on “factors other than sex” and no reasonable jury could conclude it was sex discrimination.

Eleventh Circuit Reversal

In a fairly succinct opinion, the Eleventh Circuit reversed, finding sufficient evidence to let a jury decide whether Bowen’s salary was lower than her predecessor’s because of her sex.  The court noted that not only was Bowen’s salary significantly lower than her predecessor’s, it was significantly lower than the salary range midpoint:

Manheim did not simply pay Bowen’s male predecessor a much greater starting salary; it set the predecessor’s salary near the midpoint of the compensation range for arbitration managers but consistently set Bowen’s salary at the bottom of the range. A jury could find that prior salary and prior experience alone do not explain Manheim’s disparate approach to Bowen’s salary over time. Once Bowen established herself as an effective arbitration manager, prior salary and prior experience would not seem to justify treating her different than the predecessor.

The court also noted that in proving its affirmative defense under the EPA, Manheim had to prove that none of its decision-makers were influenced by sex bias and the HR manager’s testimony provided evidence that Bowen’s managers took sex into account in personnel matters. The court further found that Bowen offered sufficient evidence from which a jury could find that sex was “a motivating factor” for the pay disparity.

Takeaways

As always, in reviewing an order on summary judgment, we have to remember that the court must consider the facts in the light most favorable to the plaintiff. We don’t know what the disputed facts will show and what the jury will conclude. With that said, here are some things that this decision made me think about:

  • Keep an eye on your pay ranges. If you have established pay ranges, be sure to compare everyone in a particular job or department. Make sure you can explain why someone is at the bottom of the range while their coworkers are at the middle.
  • Keep a close eye on pay comparators – particularly if comparators are different sexes. While Title VII requires a plaintiff to establish intentional discrimination, under the EPA a plaintiff only needs to establish a pay disparity with one male comparator and then the employer bears the burden to prove that the disparity is based on a factor other than sex and the decision-makers were not influenced by sex. The Eleventh Circuit makes it clear in this decision that a decision-maker’s comments about any personnel matter can be relevant.
  • Don’t discount a predecessor as a comparator. In this case, Bowen pointed not to a coworker but to a predecessor as her comparator, and the court said that was fine. If there are good reasons to pay a new person less than a predecessor, you can do it, but be careful. For example, if you pay Jane less than her predecessor, Bob, because he had been doing the job for three years, make sure that when Jane hits her three-year anniversary her pay looks a lot like Bob’s did (or that you have concrete reasons that it doesn’t—like her documented performance).
  • If Human Resources (with or without legal counsel) is going to look at pay differentials, think about how you will use or react to any unpleasant conclusions. If the audit reflects that women are paid less than men, take concrete steps to address the differences and do it quickly. You may want to perform such audits with legal counsel so that the results can be privileged.
  • Don’t forget that pay claims are a gift that keeps giving. This case was filed in 2015 – almost 10 years after Bowen’s promotion. While she can only go back a couple of years on her backpay, she was still able to challenge the 2005 decision because every paycheck renewed her statute of limitations (per the Ledbetter Fair Pay Act).

Pay disparities can crop up any time, and you have to be vigilant. Sometimes you have to pay someone more for a job than the predecessor because they won’t take it otherwise. On the other hand, sometimes you can replace someone with a less expensive employee. If either happens, make sure you have thought about how you can defend a discrimination claim.

Trick or Treat? Employee Claims Discrimination After Attending Office Halloween PartyBefore you send out that next office-wide invite to a “holiday” party, think twice. Carmelite Lofton has sued her employer, BSN Sports, LLC—a Texas uniform and equipment retailer—when things turned sour after she was forced to attend an office Halloween party. Lofton—an African American and a Christian, says the party was contrary to her religious beliefs and afterward she endured verbal and professional slights due to her race, religion, and disability.

The Legal Issues

The complaint contains claims under the Americans with Disabilities Act, Title VII, and the Lily Ledbetter Fair Pay Act of 2009.  She argues that for the entirety of her employment she was subject to a hostile work environment, discriminated against on the basis of her disability (osteoarthritis), and paid less than her colleagues because of her race and religion. She argues that her termination in March 2017 was unlawful and motivated by discriminatory factors.

          Disability Discrimination Claims. Regarding her disability claim, Lofton alleges that she told BSN about her osteoarthritis at the start of her employment, but was still made to perform strenuous physical activities in direct contravention of her doctor’s orders. Under the ADA, employers are charged with providing reasonable accommodations to workers with known disabilities. Reasonable accommodations can include things such as time off, modified duties, or even a special work area if it will aid the disabled employee in carrying out their job responsibilities.

Here though, Lofton argues that BSN refused to accommodate her and terminated her employment under false pretext. Specifically, Lofton points to being made to stand for over an hour while in “excruciating pain” at the Halloween party and having to clean and pack the BSN office building after it had been damaged in a flood.

          Religious Discrimination Claims. Beyond experiencing discrimination and a hostile work environment because of her disability, Lofton also asserts that her religion was a cause of conflict during her time at BSN. Specifically, Lofton alleges (1) her superiors told her she was “going to hell” for bringing in tootsie rolls, (2) she was told she “didn’t have a choice” of whether she participated in the office Halloween party, and (3) she was intentionally asked to accompany her manager to “Condom Sense” despite the knowledge that it was opposite to her religious ideals.

Lofton recites a series of alleged cringe-worthy incidents ranging from management’s off-handed comments against the Bible to being continually interrupted during private prayer meetings held during her lunch break to being told she should “just have Kool-Aid” when she refused to drink alcohol with her colleagues. Regardless, Lofton’s complaint is chock full of alleged derogatory exchanges in support of her religiously hostile work environment claim.

          Race Discrimination Claims. Lofton claims she was treated differently because of her race. To argue a disparate treatment claim, Lofton must show that her employer intentionally discriminated against her or treated her less favorably because of her race.

Here, Lofton argues that her non-African American colleagues were paid more for doing the same job and/or for doing a job with lesser duties and responsibilities. Further, she asserts that her non-African American colleagues did not have to use PTO when out for injuries or illnesses, whereas she was forced to use PTO for her osteoarthritis surgery. To strengthen her claim, Lofton includes that her superior has previously been accused of racial discrimination, citing a 2015 incident where an email with “a stick figure being hung on a noose” was distributed company-wide.

So What Does This Mean for Employers?

All we know is what Ms. Lofton says in her complaint and we all know that BSN’s version of events is likely to tell a different story. The question now becomes, as employers, what can we learn from this complaint?

  1. Check your policies. For starters, this is an excellent time to re-evaluate your company’s policies and to focus on maintaining a workplace that is welcoming to all, regardless of race, religion, gender, disability, etc. Recognize that an employee’s religious beliefs are protected and make sure they are not the subject of jokes or potentially disparaging comments.
  2. Rethink mandatory holiday celebration. Refrain from forcing any employee, regardless of religious belief, to attend company holiday functions. It is far too easy to blur the line between optional and compelled attendance, but once blurred, you run the risk of facing the same type of problem now facing BSN.
  3. Keep your management and staff up-to-date on non-discrimination policies, have routine sensitivity training, and take the position that discriminatory behaviors will not be tolerated in any form or fashion. Encourage your staff to speak with HR or to use other resources to report instances of what they believe is discrimination.
  4. Do a quick audit. Look around to make sure people who have disclosed potential disabilities are being appropriately accommodated. For employees with obvious disabilities, check to see if they have requested accommodations and haven’t yet gotten them. Check their files to see if they have submitted anything in writing. If you find someone who has been overlooked, find a way to do it…quickly.