Supreme Court Vacates and Remands Ninth Circuit Opinion that Prior Pay Is Not a Defense to Equal Pay Act Claim

The US Supreme Court issued a per curiam opinion on February 25 vacating and remanding the US Court of Appeals for the Ninth Circuit’s en banc opinion in Rizo v. Yovino, in which the Ninth Circuit held that prior pay cannot justify a wage differential between male and female employees under the federal Equal Pay Act (EPA). The Supreme Court did not decide this issue on the merits, but granted certiorari to hold that a circuit court may not count the vote of a judge who is deceased before the decision is issued.

Remanding the case to the Ninth Circuit, the Supreme Court found that the lower court’s opinion erred because the author of the majority opinion, Judge Stephen Reinhardt, died before the opinion was filed, and without his vote the opinion would have been approved by only five of the 11 members of the en banc panel. As the high court explained, “[t]hat practice effectively allowed a deceased judge to exercise the judicial power of the United States after his death. But federal judges are appointed for life, not for eternity.”

On April 9, 2018, the Ninth Circuit issued an en banc opinion in Rizo holding that prior pay cannot satisfy the EPA’s fourth defense—the catchall defense of “any other factor other than sex”—regardless of whether prior pay is considered alone or in combination with other factors.[1] Because Judge Reinhardt, who authored the majority opinion, passed away 11 days before the opinion was issued, the Ninth Circuit dropped a footnote at the beginning of the opinion stating, “[P]rior to his death, Judge Reinhardt fully participated in this case and authored this opinion. The majority opinion and all concurrences were final, and voting was completed by the en banc court prior to his death.”

On August 30, 2018, Fresno County Superintendent of Schools submitted a petition for writ of certiorari to the Supreme Court, presenting two questions: (1) whether prior salary is a “factor other than sex” under the EPA; and (2) whether deceased judges may continue to participate in the determination of cases after their deaths. After the petition for certiorari was fully briefed[2], the Supreme Court granted certiorari on the second issue, and answered it in the negative.

Based on the Ninth Circuit’s Rules and General Orders, as well as how the Ninth Circuit handled replacement of Judge Reinhardt in a different matter, it is likely that the Ninth Circuit will keep the same panel that issued the April 9, 2018, opinion, but replace Judge Reinhardt with another active Ninth Circuit judge. Assuming that the panel remains the same, other than Judge Reinhardt’s replacement, the opinions of the five concurring judges shed some light as to the potential outcome on remand.

• Judge Margaret McKeown, joined by Judge Mary Murguia, concurred in the result but argued that the majority went too far in holding that any consideration of prior pay is impermissible under the EPA. These judges opined that prior pay alone cannot be a defense to an EPA claim, but could be a defense if combined with other factors and the employer is able to show any pay differential is based on a valid job-related factor other than sex, such as education, past performance, and training. Otherwise, according to Judges McKeown and Murguia, prospective employees will not be able to voluntarily disclose their prior salary in efforts to receive higher wages.
• Judge Consuelo Callahan and Richard Tallman also concurred in the result but would have adopted a rule that permitted a defense to an EPA claim if the employer carries its burden of showing that prior pay is a component of a pay system that does not perpetuate or create a pay differential based on sex. They rejected the majority’s imposition of a job-relatedness limitation on the EPA’s fourth catchall defense, observing two factual fallacies in the majority opinion: (1) prior salary is not generally job-related; and (2) prior salary inherently reflects wage discrepancies based on gender.
• Judge Paul Watford agreed with the result but concluded that prior pay can constitute a “factor other than sex” if an employee’s prior pay is not a reflection of sex discrimination.

Considering the opinions of the five concurring judges, it is likely that the Ninth Circuit will issue an opinion holding, again, that the superintendent violated the EPA, but there is a possibility that the Ninth Circuit adopt a rule that prior pay can be a defense to an EPA claim in certain circumstances. Because the en banc panel is now evenly divided, the views of Judge Reinhardt’s replacement will be very important.

So, what should employers do? As we noted previously, the Ninth Circuit did not address California law, noting that neither party asserted any differences between the EPA and California law, even though the plaintiff had brought a separate claim under California law. California is among a growing number of jurisdictions that have passed or proposed legislation prohibiting employers from using prior pay as a justification to an unequal pay claim. Employers operating in jurisdictions that have enacted prior pay laws should continue to follow our prior guidance, including

• review employment application materials to ensure that any provisions concerning employee wage inquiries or discussions comply with applicable laws;
• train recruiting personnel about the new legislation; and
• design handbooks and policies that prohibit sex-based pay discrepancies for comparable work and prohibit retaliation against employees who take actions protected by these laws.

In addition, employers in all jurisdictions should keep track of other factors that determine initial pay—including relevant prior work experience, education, and pay for incumbents in the same or substantially similar positions—and document the specific business reasons that motivated individual pay decisions. Furthermore, employers should conduct privileged pay equity studies and evaluate compensation practices.

Contacts

If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:

Los Angeles
Barbara A. Fitzgerald

Philadelphia
Michael S. Burkhardt
W. John Lee

Silicon Valley
Michael D. Schlemmer

Washington, DC
Grace E. Speights