This month’s key California employment law cases are two decisions from the Ninth Circuit Court of Appeals.

Chavez v. JPMorgan Chase & Co., 888 F.3d 413 (9th Cir. 2018)

Summary: Amount in controversy for federal diversity jurisdiction is not limited to damages incurred prior to removal but determined by complaint operative at time of removal and encompassing all relief court may grant on that complaint if plaintiff is victorious.

Facts: Plaintiff employee sued her former employer in California state court for various violations of the California Fair Employment and Housing Act (“FEHA”) and the California Labor Code. Defendant removed the case to federal district court on grounds of diversity jurisdiction. Plaintiff did not contest removal. The parties then filed a stipulated plan stating that the court had jurisdiction on the basis of diversity jurisdiction. Defendant filed a motion for summary judgment, which the court granted on all claims. On appeal, plaintiff argued that the removal was improper and that the federal court lacked subject matter jurisdiction because the amount in controversy did not exceed $75,000 at the time of removal.

Court’s Decision: The Court of Appeals for the Ninth Circuit affirmed that the district court had subject matter jurisdiction. Even though litigants cannot stipulate to federal jurisdiction where it does not exist, plaintiff’s concession of jurisdiction was strong evidence that the amount in controversy exceeded $75,000. Regardless of plaintiff’s concession, there was sufficient evidence to establish that the jurisdictional minimum had been met. The court also clarified the common statement that the amount in controversy is assessed at the time of removal. This means that a court considers damages that are claimed at the time the case is removed. If a plaintiff files a complaint in state court and voluntarily dismisses a claim before removal, any relief that might have been awarded on the dismissed claim will not be included in the amount in controversy. Likewise, when the amount in controversy is satisfied at removal, any subsequent amendment to the complaint or partial dismissal that decreases the amount in controversy below the jurisdictional threshold does not oust the federal court of jurisdiction. That the amount in controversy is assessed at the time of removal does not mean that the mere futurity of certain classes of damages precludes them from being part of the amount in controversy.

Practical Implications: While the practical implications of this decision will be found more in the courtroom than in the workplace, it provides much needed clarity on the amount in controversy issue that had been interpreted differently by the federal district courts in California.

Rizo v. Yovino, 887 F.3d 453 (9th Cir. 2018)

Summary: Prior salary alone or in combination with other factors cannot justify wage differential under federal Equal Pay Act.

Facts: Plaintiff, a female teacher hired by the Fresno County Office of Education, earned less than her male counterparts. After being hired, she learned of this discrepancy and sued the county for violations of the federal Equal Pay Act (“EPA”). The county moved for summary judgment, arguing that because it utilized prior salaries of its applicants in determining its salary scale, and prior salaries were a gender-neutral factor, there was no violation of the EPA. The district court denied summary judgment, reasoning that using prior salary information necessarily and unavoidably conflicted with the EPA because it virtually ensured the perpetuation of a discriminatory wage disparity between men and women.

Court’s Decision: This Court of Appeals for the Ninth Circuit vacated the denial of summary judgment and remanded, relying on Kouba v. Allstate Insurance Co., 691 F.2d 873 (9th Cir. 1982), to find that prior salary alone was a factor other than sex under the EPA. The Ninth Circuit en banc subsequently reversed, finding that prior salary does not fit within the catchall exception of a factor other than sex because it is not a legitimate measure of work experience, ability, performance, or any other job-related quality. While prior salary may bear a rough relationship to legitimate factors other than sex—such as training, education, ability or experience—that relationship is too attenuated to rely upon. Rather, allowing an employer to use prior salary for setting initial wages could (and likely would) perpetuate wage disparities prohibited by the EPA. Rather than use a second-rate surrogate that likely masks continuing inequities, an employer must instead point directly to underlying factors for which prior salary is a rough proxy, at best, if it is to prove its wage differential is justified under the catchall exception. The Ninth Circuit thus overruled its holding in Kouba, finding: (1) a factor other than sex must be one that is job-related, rather than one that effectuates some business policy; (2) it is impermissible to rely on prior salary to set initial wages because it is not job-related and it perpetuates gender-based assumptions about the value of work that the EPA was designed to end; and (3) prior salary cannot be used as the sole factor or one of several factors considered in establishing wages because that is a distinction without a difference.

Practical Implications: This decision is consistent with California’s recent ban on asking applicants about prior salary history. To comply with both, employers should not request or use applicants’ prior salary information as a factor in setting initial wages. Employers should also review compensation guidelines for setting starting wages to ensure that every factor relied upon meets the job-related standard.