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Employers allowed to use salary history to set new salaries

Whether you are looking for a new job or are recruited to take a new position, chances are that you are looking for an increase in salary. To that extent, salary history could be used in setting your new salary. But when salary history is used to pay someone less than their peers, such a practice should be actionable.

Or should it?

According to the U.S. Court of Appeals for the Ninth Circuit, one’s salary history could be used in setting new salary in limited circumstances. A math consultant for Fresno County schools learned that she was paid less than her colleagues even though they had the same job and responsibilities. She sued under the Equal Pay Act, and a U.S. District Court judge found that setting her salary based on prior pay was “so inherently fraught with risk” that it would perpetuate wage discrimination.

However, the appeals court disagreed. It reasoned that the Equal Pay Act allows employers to use an applicant’s salary history as a factor (other than sex) if it supports a legitimate, non-discriminatory business policy and the employer uses the factor reasonably. It agreed with Fresno County on its rationale for considering salary history, which included:

-          Prevention of favoritism and ensuring consistency in salaries

-          Encouraging qualified candidates to leave prior employment

The Ninth Circuit sent the case back to the district court to examine whether Fresno County applied its policy reasonably. In the meantime, the ruling sets a possible showdown before the U.S. Supreme Court, given that appellate courts in other jurisdictions came to the opposite conclusion. 

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