U.S. Chamber of Commerce. Credit: Diego M. Radzinschi/ NLJ

Business groups are urging the U.S. Supreme Court to overturn a federal appeals ruling that said employers cannot use a worker's prior salary history to justify paying men and women differently for comparable jobs.

The use of prior compensation in setting salary is a common part of the hiring practice, and outlawing it would create uncertainty for employers, according to the business advocates, including the U.S. Chamber of Commerce and Society for Human Resource Management, which filed a friend-of-the-court brief last week in the Supreme Court.

“Employers large and small, in every region of the United States, have historically used prior salary as a metric to assess a range of matters, including the caliber and experience of applicants, the viability and competitiveness of their own compensation packages, and, ultimately, the fairness of the wages they pay to employees,” lawyers for the business groups, represented by Jonathan Franklin of Norton Rose Fulbright, said in the brief. “By placing wage-history data off limits for employers within the nation's largest circuit, the court of appeals' rule exacerbates a clear, acknowledged split regarding the legal viability of that important practice.”

The Supreme Court was asked to hear the case Yovino v. Rizo, arising from the U.S. Court of Appeals for the Ninth Circuit. The appeals court, divided, in April said employers can't justify gender wage differences by citing prior salary history. Aileen Rizo, the lead challenger, alleged she makes thousands of dollars less than similarly situated male colleagues in the Fresno, California, school district. Dan Siegel of Siegel, Lee & Brunner in Oakland, represents Rizo.

“The Equal Pay Act stands for a principle as simple as it is just: men and women should receive equal pay for equal work regardless of sex,” the late Judge Stephen Reinhardt wrote in the NInth Circuit's ruling. “The question before us is also simple: can an employer justify a wage differential between male and female employees by relying on prior salary? Based on the text, history, and purpose of the Equal Pay Act, the answer is clear: No.”

A team from Jones Day represents the Fresno school district, and the attorneys, led by partner Shay Dvoretzky, filed a petition for review in September.

Two federal appeals courts—the Tenth and Eleventh circuits—previously held that prior pay alone cannot be considered an exemption to equal pay laws. The Seventh Circuit has ruled that previous salary can be considered.

“[T]he circuit split means that the legal standard varies depending on where they happen to be located. The vast majority of employers in the United States operate in jurisdictions in which reliance on salary history is entirely legal,” lawyers for the business groups said in their amicus brief. “An overwhelming percentage of American businesses operate locally, and therefore have no reason to comply with bans in the few coastal states that have enacted them.”

The amicus brief noted a 2017 study that said it found 65 percent of executives believe their operations would be affected by a ban on questions about prior pay and “hundreds of thousands of employers would need to modify their talent screening and hiring processes.”

“Virtually none of those employers consider themselves 'well prepared' to handle such a ban,” Norton Rose's Franklin wrote. “As this case demonstrates, it is not just private employers that find it useful to ask about and rely on salary history when making decisions about recruitment, compensation, and retention.”

The Center for Workplace Compliance and The National Federal of Independent Business Small Business Legal Center also filed an amicus brief, citing similar concerns. Those groups are represented by Rae Vann of Washington's NT Lakis LLP.

In the Ninth Circuit, the U.S. Equal Employment Opportunity Commission backed Rizo as a friend-of-the-court. The EEOC said reliance on salary history “institutionalizes” the gender pay gap.

Several cities and states have banned salary history inquiries or have proposals pending, including California, Delaware, Massachusetts, Oregon, New Orleans, Philadelphia and New York City.

 

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