60 | Developments in Equal Pay Litigation 2025 ©2025 Seyfarth Shaw LLP Rizo v. Yovino430 is a significant decision bearing on this issue.431 The district court in that case held: “[A] pay structure based exclusively on prior wages is so inherently fraught with the risk—indeed, here, the virtual certainty—that it will perpetuate a discriminatory wage disparity between men and women that it cannot stand, even if motivated by a legitimate non-discriminatory business purpose.”432 The Ninth Circuit agreed, holding that “setting wages based on prior pay risks perpetuating the history of sex-based wage discrimination,”433 and: “[t]he express purpose of the act was to eradicate the practice of paying women less simply because they are women. Allowing employers to escape liability by relying on employees’ prior pay would defeat the purpose of the act and perpetuate the very discrimination the EPA aims to eliminate.”434 The Ninth Circuit’s decision in Rizo adds to a growing split among the Courts of Appeals on this issue. The Seventh Circuit came to an arguably different conclusion in Lauderdale v. Illinois Department of Human Services.435 Its prior decisions had consistently held that a difference in pay based on the difference in what employees were previously paid is a legitimate factor other than sex under the EPA.436 Relying on that precedent, the Seventh Circuit held that a pay discrepancy that was created in reliance on prior salaries is not a violation of the EPA unless sex discrimination led to the lower prior wages.437 The Eighth Circuit has also followed this line of reasoning.438 Other Circuits have held differently. For example, in Irby v. Bittick,439 the Eleventh Circuit held that “[w]hile an employer may not overcome the burden of proof on the affirmative defense of relying on ‘any other 430 Rizo v. Yovino, 854 F.3d 1161 (9th Cir. 2017), aff’d en banc, 887 F.3d 453 (9th Cir. Apr. 9, 2018), rev’d, 139 S.Ct. 706 (2019). 431 In that case, a county employee challenged the county’s practice of using prior salary to determine starting salaries. Id. at 1163. The county used a salary schedule to determine the starting salaries of management-level employees, which used prior salary to determine starting salaries. Id. To determine the step on which a new employee would begin, the county considered the employee's most recent prior salary and placed the employee on the step that corresponds to his or her prior salary, increased by 5%. Id. Because the plaintiff’s prior salary was below the Level 1, Step 1 salary, even when increased by 5%, she was automatically started at the minimum salary level. Id. at 1164. 432 Rizo v. Yovino, No. 1:14-cv-0423-MJS, 2015 WL 9260587, at *9 (E.D. Cal. Dec. 18, 2015). 433 Rizo v. Yovino, 950 F.3d 1217, 1228 (9th Cir. 2020). 434 Id. at 1219. In concurring opinions, two judges said their colleagues should have taken the more moderate approach of some other circuits. Judge Margaret McKeown said the policy did not justify the disparity between plaintiff’s pay and that of her male coworkers, but salary history “may provide a lawful benchmark” for setting pay if considered alongside other factors such as education and training. Id. at 1234. Judge Consuelo Callahan also concurred, joined by Judges Tallman and Carlos Bea. She stated that an employer should be permitted to use past salary as a factor in setting pay, as long as its use “does not reflect, perpetuate, or in any way encourage gender discrimination.” Id. at 1241. 435 Lauderdale v. Ill. Dep’t of Human Servs., 876 F.3d 904 (7th Cir. 2017). In this case, the Seventh Circuit held that the Illinois pay plan for state employees did not violate the EPA by basing pay increases, at least in part, on an employee’s prior salary. The Department had conceded that plaintiff had established a prima facie case under the EPA because she had taken over the same responsibilities as her predecessor but was paid less. Id. at 907-08. She was therefore paid less for work that was equal to, if not more demanding than, the work performed by her male predecessor. However, the Department argued that the pay discrepancy was based on non-discriminatory bases, including the employees’ prior salaries. Id. at 908-09. 436 Id. at 908 (citing Wernsing v. Dep't of Human Servs., 427 F.3d 466, 468 (7th Cir. 2005); Dey v. Colt Constr. & Dev't Co., 28 F.3d 1446 (7th Cir. 1994); Riordan v. Kempiners, 831 F.2d 690 (7th Cir. 1987), and Covington v. S. Ill. Univ., 816 F.2d 317 (7th Cir. 1987)). 437 Id. at 909. See also Korty v. Ind. Univ. Health, Inc., No. 4:21-cv-33-PPS, 2022 WL 17830485, at *4 (N.D. Ind. Dec. 21, 2022) (“The Court acknowledges that ‘basing pay on prior wages could be discriminatory if sex discrimination led to the lower prior wages.’ But [plaintiff] has not made that showing at all—nowhere has she shown that [comparator’s] previous salary was inflated based upon his sex.”) (internal citations omitted) (quoting Lauderdale v. Ill. Dep't of Human Servs., 876 F.3d 904, 908 (7th Cir. 2017)). 438 See Taylor v. White, 321 F.3d 710 (8th Cir. 2003). In Taylor, a female civilian employee of the Army alleged that her pay at a lower pay grade than her male peers was a violation of the EPA. Id. at 713. The Army sought summary judgment, arguing that the pay disparity was the result of its non-statutory salary retention policy that was intended to retain skilled workers and protect workers’ salaries. Id. at 716. The employee argued that, as a matter of law, an employer should not be allowed to rely on prior salary or a salary retention policy as a defense under the EPA because those factors would permit the perpetuation of unequal pay structures. Id. The Eighth Circuit examined the Circuit split and, in particular, adopted the reasoning of the Ninth (before Rizo) and Seventh Circuits in Kouba and Covington, respectively, over that of the Eleventh Circuit. Id. at 718-19. The Eighth Circuit concluded: “we believe a case-by case analysis of reliance on prior salary or salary retention policies with careful attention to alleged genderbased practices preserves the business freedoms Congress intended to protect when it adopted the catch-all ‘factor other than sex’ affirmative defense. To conduct a reasonableness inquiry into the actions of the employer or to limit the application of a salary retention policy to only exigent circumstances would, we believe, unnecessarily narrow the meaning of the phrase ‘factor other than sex.’” Id. at 720. 439 Irby v. Bittick, 44 F.3d 949 (11th Cir. 1995).
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