The 9th Circuit Court of Appeals recently ruled that salary history is not an acceptable reason for pay discrepancies under the Equal Pay Act (EPA). The purpose of the EPA is to ensure men and women receive equal pay for equal work.
The EPA allows for pay discrepancies caused by a seniority system, a merit system, a system that measures earnings by quantity or quality of production, or any factor other than sex. The defendants in the case argued the use of salary history to determine a new employee's starting salary counts as "any factor other than sex". The court determined that an employee's past salary history is likely to be impacted by gender-based pay discrimination and thus would be contrary to the purpose of the EPA.
The court further clarified that "any factor other than sex" is limited to job-related factors, such as experience and education. It also stated that business-related reasons, such as offering higher wages to attract candidates, were also not acceptable reasons for pay discrepancies.
The ruling affects all employers in the 9th Circuit district, including Oregon and Washington. Oregon passed a bill last year prohibiting employers from requesting pay history until after they've made an offer of employment that includes compensation. Employers are advised to audit their pay scales to ensure all pay discrepancies are job-related, and to cease using pay history as a determining factor in starting pay.