On February 25, 2019, the United States Supreme Court vacated and remanded the Ninth Circuit’s decision in Rizo v. Yovino, in which it held an employer cannot justify a wage differential between men and women by relying on prior salary. The Supreme Court determined that the Ninth Circuit’s publication of the Rizo decision was contrary to established appellate precedent and judicial practice because the judge who authored the majority decision was deceased at the time the decision issued. Explaining that “federal judges are appointed for life, not for eternity,” the Supreme Court granted certiorari and vacated the Ninth Circuit’s decision.
The Ninth Circuit’s Decision in Rizo
In Rizo, the Ninth Circuit reinterpreted an important exception to the federal Equal Pay Act (EPA). By way of background, the EPA provides that employers must provide equal pay between employees for equal work. The EPA provides four defenses to this general rule. Pay disparities will be deemed lawful if they are made pursuant to: (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. The fourth defense is commonly referred to as the “catchall” exception. To succeed on an EPA claim, a plaintiff must show that her employer has paid male and female employees different wages for substantially equal work. Once she does so, the employer may submit evidence to demonstrate that the pay disparity should be excused under any of the four statutory defenses. Because of its open-ended breadth, the catchall exception is most frequently invoked by employers in defending against EPA claims.
In Rizo, the defendant employer alleged that the EPA’s fourth catchall defense, “any factor other than sex,” included consideration of an employee’s prior salary. The Ninth Circuit disagreed and held that prior salary – alone or in combination with other factors – could not justify a wage differential because prior salary is not job related, and perpetuates the gender-based assumptions about the value of work that the Equal Pay Act was designed to end.
The decision issued on April 9, 2018, and was written by Judge Stephen Reinhardt on behalf of an en banc majority. However, Judge Reinhardt passed away on March 29, 2018, 11 days prior to issuance of the decision. In an introductory footnote, the Ninth Circuit in Rizo explained that “[p]rior to his death, Judge Reinhardt fully participated in th[e] case and authored this opinion,” and that “[t]he majority opinion and all concurrences were final, and voting was completed by the en banc court prior to his death.”
The Supreme Court Determined Rizo Should be Vacated
The employer appealed the Ninth Circuit’s decision and sought review by the U.S. Supreme Court. The employer argued that the Ninth Circuit’s decision should be set aside, in part, because “deceased judges cannot decide cases.” More specifically, the employer argued that the Ninth Circuit erred by issuing a decision that relied upon Judge Reinhart’s vote to support the majority opinion.
Relevant appellate procedural statutes require that cases and controversies “be heard and determined by” en banc panels consisting of “circuit judges” in “active service.” Because Judge Reinhardt was deceased when the decision was issued, the Supreme Court held he was not in “active service.” The Court determined that the Ninth Circuit’s justification – that Judge Reinhardt was able to cast a vote and deliver the court’s decision because he had previously participated in the case and authored the opinion prior to his death – was inconsistent with established judicial practice and federal statutory law. Citing relevant judicial precedent, the Supreme Court determined that because Judge Reinhart was not an active judge when the decision was issued, he was “without power” to participate in the en banc court’s decision at the time it was rendered. On this basis only, the Supreme Court vacated Rizo and remanded the case back to the Ninth Circuit.
Status of the Catchall Exception Looking Forward: Stay Tuned
In remanding Rizo, the Supreme Court made no pronouncements regarding the substance of the Ninth Circuit’s holding with respect to the EPA’s fourth catchall exception. Employers in the Ninth Circuit must now wait and see whether the court will issue an opinion on remand consistent with the one authored by Judge Reinhardt. However, many California employers have already implemented the premise of Rizo, banning salary history from considerations in compensation decisions. State law developments have dramatically altered the landscape in this area over the last few years, with California, Oregon, Washington, and Hawaii all having introduced prohibitions against consideration of prior salary when determining wage levels. Many other states outside of the Ninth Circuit have followed suit. Nonetheless, a circuit split on this issue under the federal EPA persists. It is unclear whether the next Rizo decision will make its way to the Supreme Court to be decided on the merits. In the interim, it is recommended that employers continue to monitor pay disparities, and ensure that any distinctions in employee pay are based upon job-related factors – including an applicant or employee’s training, education, ability, or experience – and not prior salary.