Magazine article HRMagazine

Improve Employee Databases to Ensure Pay Equity

Magazine article HRMagazine

Improve Employee Databases to Ensure Pay Equity

Article excerpt

Take into account past experience to defend against discrimination claims.

If recent state legislation regarding pay equity hasn't prompted you to take another look at your employee database, a landmark court decision should. In Rizo v. Yovino, the 9th Circuit held earlier this year that a person's previous compensation could not be used as a legitimate reason to justify pay disparities between men and women.

What can be lawfully considered when setting salary is employees' past experience. The problem, of course, is that most companies don't capture work history in their databases.

THE DECISION

Aileen Rizo, the plaintiff in the case who worked as a math consultant at a school, sued the school district under the federal Equal Pay Act after discovering that she was paid less than a man in a similar position. The county had a policy of compensating newly hired employees 5 percent more than what they had earned previously. Rizo alleged that the practice could not be considered a factor other than sex that justified offering her lower compensation than others who performed work of equal skill, effort and responsibility.

Prior to Rizo, some courts held that employers could lawfully consider prior salary in setting pay, even when such compensation was based on roles that were unrelated to the duties of the employee's current position. Other courts allowed it but urged caution, recognizing that, standing alone, using previous compensation might perpetuate pay inequities.

The 9th Circuit previously was among the courts that allowed prior pay as a legitimate factor in deciding salary. In its 1982 decision Kouba v. Allstate Insurance Co., it advocated a "pragmatic standard" and ruled that an employer's policy of setting pay could be considered "reasonable" if it aligned with the company's stated purpose and practices. So fair compensation could be set for new employees based on their ability, education, experience and prior salary.

Rizo overruled Kouba, going further than any other court in holding that prior salary could not be considered in deciding pay. That's because, to be legitimate, the determining factor must be job-related. Since prior pay relates to a different job, by definition it cannot be related to a person's present position, according to the ruling. Moreover, the court viewed employers' reliance on prior pay as inconsistent with the Equal Pay Act's remedial purpose-"to put an end to historical wage discrimination against women."

CONSIDERING PRIOR SALARY

In light of Rizo, HR professionals who work for employers in the 9th Circuit-Alaska, Arizona, California, Guam, Hawaii, Idaho, Montana, Nevada, Northern Mariana Islands, Oregon and Washington- may not set pay based on an employee's prior salary. This applies to both male and female workers. …

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