The Catchall Exception of the Equal Pay Act

IS THE RIZZO v. YOVINO, A Precedent Setting Case Under The Equal Pay Act Or An Aberration?

In 1963, Congress passed into legislation the Equal Pay Act with the aim to abolish the “serious and endemic problem of employment discrimination in private industry” and to issue a wide-ranging fiat of equal pay for equal work regardless of sex.

In order to establish a prima facie case pursuant to the provisions of the Equal Pay Act, a movant must prove the following elements: (1) The employer pays different wages to employees of the opposite sex; (2) the employees perform equal work on jobs requiring equal skill, effort and responsibility and (3) the jobs are performed under similar working conditions. There are four exceptions to the Equal Pay Act which are: Employer is justified in paying a different wage to the members of the opposite sex based on a (1) a Seniority system; (2) a Merit system; (3) a system which measures earnings by quantity or quality of production or (4) a differential based on any factor other than sex. Factors other than sex which can be responsible for legal wage disparities are as follow: A) additional training or education; B) A higher degree of experience in the industry; 3) greater revenue-generation by the employee; 4) greater employee bargaining power. Exception #4 is often referred to the “Catchall” provision of the Equal Pay Act and has been subjectively interpreted in an untold number of cases giving rise to fertile grounds for litigation. It is noteworthy to mention that the Courts have repeatedly emphasized when tasked with interpreting the Catchall provision (Factors Other Than Sex), that such factors must be employment related and confer benefit to the employer’s business/industry and applied equally to male and female employees. By way of example, a school is legally justified to set a higher pay scale for a teacher with a master’s or PhD degree in education more than a teacher without, or an employer could also opt to provide a raise to a worker who had received an lucrative offer from a competitor (greater bargaining power example as duly noted above).

Background: Aileen Rizzo was proffered employment as a mathematical consultant by the Fresno County Office of Education in late 2009. Prior to accepting the position of mathematical consultant for Fresno County, she was employed in Maricopa County, Arizona in the capacity of a high school math teacher. Her annual salary as a math teacher at Maricopa County was $50,630.00 for 206 working calendar days and a $1,200.00 educational stipend in recognition of her master’s degree in educational technology and mathematics.

Rizzo’s salary offered by Fresno County was determined based on the Standard Operating Procedure titled: (“SOP 1440”). Fresno County’s hiring salary scale consists of ten calibrated salary levels, with each corresponding level containing the ten referenced salary thresholds. SOP mandates that a new employee’s salary is to be established by factoring the new employee’s prior salary, adding 5% and positioning the new hire on the corresponding salary step chart and/or schedule. Fresno’s SOP 1440 does not rely on the new hire’s experience to establish a baseline salary amount. Accordingly, and pursuant to the SOP 1440 guidelines, Ms. Rizzo’ starting salary was set at $62,133.00 for 196 days of work in addition to a master’s degree stipend of $600.00.

In 2012, Rizzo was made aware that a male colleague had been hired as a math consultant at a higher salary. In August 2012, Plaintiff Rizzo filed a complaint claiming wage discrimination under the Provisions of the Equal Pay Act (29 U.S.C. Section 206(d)) and sex discrimination under Title VII of the Civil Rights Act of 1964, 42 U.S.C. Section 2000e. Fresno County responded that all salaries had been established in accordance with the mandates of SOP 1440. The County asserted as an affirmative defense that it had reviewed salary-step placements of male and female employees for the past twenty-five years claiming that their standard hiring practices (SOP 1440) had placed more women at higher compensation steps than males. Rizzo vehemently challenged this assertion stating that the empirical data demonstrated that men were placed at a higher average starting salary.

In June 2015, Fresno County moved to dismiss the case based on a Summary Judgment claiming that no material issue of fact was in dispute, hence the need for an outright dismissal. The County stated in its Motion for Summary Judgment that although there was no dispute that Rizzo was paid less than her male cohorts for performing the same work, the pay disparity was based on Rizzo’s prior salary. The County submitted that Rizzo’s prior salary served as an affirmative defense to her lower salary than her male counterparts, pursuant to the fourth catchall exception of the Equal Pay Act of “factors other than sex.” The district court denied summary judgment, stating that: “SOP 1440 necessarily and unavoidably conflicts with the EPA” because “a pay structure based exclusively on prior wages is so inherently fraught with risk - indeed here, the virtual certainty - that it will perpetuate a discriminatory wage disparity between men and women it cannot stand.”

The seminal question before the Ninth Circuit Court of Appeals was: “Whether, as a matter of law under the Equal Pay Act, 29 U.S.C. Section 206(d), an employer subject to the Equal Pay Act may rely on prior salary alone when setting an employee’s starting salary?”

The trial court in considering the merits of the above query had sought guidance from a previous case with a similar fact pattern in the case of Kouba v. Allstate Insurance Company, 691 F.2d 873 (9th Circuit 1982). The trial court had construed the fact pattern of Kouba as permitting prior salary alone to constitute a “factor other than sex” under the provisions of the Equal Pay Act. In Kouba, the employer took into consideration its employees’ prior salary as well as other factors, including ability, education, and experience in establishing salary benchmarks for its employees. The trial court felt compelled to follow the Kouba reasoning since the defendant Allstate “did not attribute any significance to its use of these other factors,” that case permits consideration of prior salary alone, as long as use of that factor “was reasonable and effectuated some business policy.”

The Ninth Circuit Court of Appeal’s conclusion was that Fresno County cannot use Plaintiff Rizzo’s prior salary as a factor in setting her starting salary and that the catchall provision of the Equal Pay Act was not a viable and applicable affirmative defense proffered by Fresno County.

THE COURT’S REASONING FOR REACHING SUCH A CONCLUSION:

Writing for the majority, Justice Reinhardt stated that: “The Equal Pay Act creates a type of strict liability for employers who pay men and women different wages for the same work; once a plaintiff demonstrates a wage disparity, she is NOT required to prove discriminatory intent. (Maxwell, 803 F.2d at 446). In Ledbetter v. Goodyear Tire & Rubber Co. Inc., the Supreme Court stated, “the EPA does not require proof of intentional discrimination.” 550 U.S. 618,641 (2007). Here the County does not dispute that Rizzo established a prima facie case and that none of the three specific statutory exceptions applies. The County urges instead that the fourth catchall exception, “any other factor other than sex,” includes an employee’s prior salary and applies when her starting salary is based on her prior salary.

The question in this case is the meaning of the catchall exception. This is purely a question of law. We conclude unhesitatingly that “any other factor other than sex” is limited to legitimate, job-related factors such as a prospective employee’s experience, educational background, ability, or prior job performance. It is inconceivable that Congress, in an Act the primary purpose of which was to eliminate long-existing “endemic” sex based wage disparities, would create an exception for basing new hires’ salaries on those very disparities - disparities that Congress declared are not only related to sex but caused by sex. To accept the County’s argument would be to perpetuate rather than eliminate the pervasive discrimination at which the Act was aimed. Prior salary, whether considered alone or with other factors, is not job related and thus does not fall within an exception to the Act that allows employers to pay disparate wages. Reflecting the very essence of the Act, we hold that by relying on prior salary, the County fails as a matter of law to set forth an affirmative defense.”

CONCLUSION: The seismic decision in Rizzo proscribes employers from inquiring into a new hire’s previous salary for setting the benchmark for the newly to be onboarded employees. Such a query, according to the Ninth Circuit Court of Appeals does not fall within one of the “job—related” exceptions of the Catchall provision of the Equal Pay Act. It remains to be seen whether other federal district courts in the nation will look to Rizzo as a precedent-setting case to be followed or will the other federal district courts select to trailblaze their own unique criteria and interpretation of the Equal Pay Act regarding setting starting salary benchmarks under the broad contours of the Equal Pay Act. It is possible to envision different federal district circuit courts reaching different conclusions on this “specifically tailored query” which will position it for possible consideration by the United States Supreme Court to address the issue due to the divergence of opinions issued by different federal district courts.