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San Francisco’s Consideration of Salary History Ordinance (the “Ordinance”) takes effect on July 1, 2018. The Ordinance in certain respects mirrors California’s Labor Code section 432.3, which went into effect on January 1, 2018.

Section 432.3 prohibits both public and private employers from relying on salary history information of an applicant as a factor in determining whether to offer employment or the amount of pay. It also prohibits employers from seeking salary history information about an applicant, either directly or indirectly. Section 432.3 also requires an employer to provide the pay scale for a position to an applicant upon a reasonable request.

The Ordinance prohibits employers from (1) asking applicants about their current or past salary, or (2) disclosing a current or former employee’s salary history to a prospective employer without that employee’s written authorization, unless the salary history is publicly available, required by law, or subject to a collective bargaining agreement.

Under both laws, an employer may consider salary history if the employee voluntarily and without prompting discloses it. Further, the Ordinance permits employers to “engage in discussion” concerning the applicant’s “expectations” about salary, including unvested equity, deferred compensation, or bonus that an applicant would forfeit or have canceled by virtue of the applicant’s resignation from their current employer. However, no similar provision exists under Section 432.3.

A federal appeal court ruled that salary history cannot be used to justify a wage gap between men and women, in a case that employee advocates said highlights a key issue that has institutionalized gender compensation inequities.

The U.S. Court of Appeals for the Ninth Circuit, which heard the case Rizo v. Fresno County Office of Education en banc last year, found that an employee’s prior salary-either alone or in a combination of factors-cannot be used to justify paying women less than men in comparable jobs.

“The Equal Pay Act stands for a principle as simple as it is just: men and women should receive equal pay for equal work regardless of sex,” Judge Stephen Reinhardt wrote in the opinion. “The question before us is also simple: can an employer justify a wage differential between male and female employees by relying on prior salary? Based on the text, history, and purpose of the Equal Pay Act, the answer is clear: No.”

Aileen Rizo, a math consultant in Fresno County, California, filed the suit in 2012 after she discovered she was paid less than male counterparts by as much as $10,000. The county justified the pay differential based on the previous salary she made at a school in Arizona. The three-judge panel of the Ninth Circuit ruled that salary could be used by the county to justify the discrepancy. The case will return to the district court.

In Monday’s ruling overturning the panel decision, Reinhardt wrote, “Salaries speak louder than words.” He noted that the Equal Pay Act prohibits sex-based wage discrimination but prior to this decision the law was unclear on whether an employer could consider prior salary in determining pay scale. The majority ruling found that “to accept the county’s argument would perpetuate rather than eliminate the pervasive discrimination” that the federal law aimed to protect.

“In light of the clear intent and purpose of the Equal Pay Act, it is equally clear that we cannot construe the catchall exception as justifying setting employees’ starting salaries on the basis of their prior pay,” Reinhardt wrote. “At the time of the passage of the act, an employee’s prior pay would have reflected a discriminatory marketplace that valued the equal work of one sex over the other. Congress simply could not have intended to allow employers to rely on these discriminatory wages as a justification for continuing to perpetuate wage differentials.”

Source: The Recorder, https://www.law.com/therecorder/2018/04/09/prior-salary-cant-justify-gender-wage-gap-en-banc-ninth-circuit-says/?kw=Prior%20Salary%20Can%27t%20Justify%20Gender%20Wage%20Gap%2C%20En%20Banc%20Ninth%20Circuit%20Says, Erin Mulvaney, April 9, 2018.

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