Rizo v. Yovino

          Argued and Submitted En Banc December 12, 2017 San Francisco, California

          Appeal from the United States District Court for the Eastern District of California Michael J. Seng, Magistrate Judge, Presiding D.C. No. 1:14-cv-00423-MJS

          Shay Dvoretsky (argued), Jones Day, Washington, D.C.; Michael G. Woods and Timothy J. Buchanan, McCormick Barstow Sheppard Wayte & Carruth LLP, Fresno, California; for Defendant-Appellant.

          Daniel M. Siegel (argued) and Kevin Brunner, Siegel & Yee, Oakland, California, for Plaintiff-Appellee.

          Jessica Stender (argued), Equal Rights Advocates, San Francisco, California, for Amici Curiae Equal Rights Advocates; 9to5, National Association of Working Women; American Association of University Women; American Association of University Women-California Chapter; ACLU of Northern California and ACLU Women's Rights Project; Atlanta Women for Equality; California Women's Law Center; Feminist Majority Foundation; Legal Aid at Work; Legal Voice; National Organization for Women (NOW) Foundation; National Partnership for Women and Families; National Women's Law Center; Southwest Women's Law Center; Women Employed; and Women's Law Project.

          Barbara L. Sloan (argued), Attorney; Margo Pave and Elizabeth E. Theran, Assistant General Counsel; Jennifer S. Goldstein, Associate General Counsel; James L. Lee, Deputy General Counsel; P. David Lopez, General Counsel; Office of the General Counsel, Washington, D.C.; as and for Amicus Curiae Equal Employment Opportunity Commission.

          Laurence S. Zakson, Aaron G. Lawrence, and Marianne Reinhold, Reich Adell & Cvitan APLC, Los Angeles, California, for Amici Curiae Make-Up Artists and Hair Stylists Guild, Local 706 of the International Alliance of Theatrical State Employees, Moving Picture Technicians, Artists and Allied Crafts of the United States, its Territories and Canada, AFL-CIO, CLC; Costume Designers Guild, Local 892 of the International Alliance of Theatrical Stage Employees, Moving Picture Technicians, Artists and Allied Crafts of the United States, its Territories and Canada, AFL-CIO, CLC; and Orange County Managers Association.

          Rae T. Vann and Danny E. Petrella, Washington, D.C., for Amicus Curiae Center for Workplace Compliance.

          Before: Sidney R. Thomas, Chief Judge, and Stephen Reinhardt, ^[*] M. Margaret McKeown, William A. Fletcher, Richard A. Paez, Marsha S. Berzon, Richard C. Tallman, Consuelo M. Callahan, Mary H. Murguia, Morgan Christen and Paul J. Watford, Circuit Judges.

         SUMMARY^[**]

         Employment Discrimination

         Affirming the district court's denial of summary judgment to the defendant on a claim under the Equal Pay Act, the en banc court held that prior salary alone or in combination with other factors cannot justify a wage differential between male and female employees.

         Overruling Kouba v. Allstate Ins. Co., 691 F.2d 873 (9th Cir. 1982), the en banc court held that an employee's prior salary does not constitute a "factor other than sex" upon which a wage differential may be based under the statutory "catchall" exception set forth in 29 U.S.C. § 206(d)(1). The en banc court concluded that "any other factor other than sex" is limited to legitimate, job-related factors such as a prospective employee's experience, educational background, ability, or prior job performance. By relying on prior salary, the defendant therefore failed as a matter of law to set forth an affirmative defense. The en banc court remanded the case to the district court.

         Concurring, Judge McKeown, joined by Judge Murguia, wrote that she agreed with most of the majority opinion, particularly its observation that past salary can reflect historical sex discrimination. She wrote that the majority, however, went too far in holding that any consideration of prior pay is impermissible under the Equal Pay Act, even when it is assessed with other job-related factors.

         Concurring, Judge Callahan, joined by Judge Tallman, wrote that in holding that prior salary can never be considered, the majority failed to follow Supreme Court precedent, unnecessarily ignored the realities of business, and, in doing so, might hinder rather than promote equal pay for equal work.

         Concurring in the judgment, Judge Watford wrote that in his view, past pay can constitute a "factor other than sex, " but only if an employee's past pay is not itself a reflection of sex discrimination.

          OPINION

          REINHARDT, CIRCUIT JUDGE

         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. 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. Congress recognized in 1963 that the Equal Pay Act was long overdue: "Justice and fairplay speak so eloquently [on] behalf of the equal pay for women bill that it seems unnecessary to belabor the point. We can only marvel that it has taken us so long to recognize the fact that equity and economic soundness support this legislation."^[1] Salaries speak louder than words, however. Although the Act has prohibited sex-based wage discrimination for more than fifty years, the financial exploitation of working women embodied by the gender pay gap continues to be an embarrassing reality of our economy.

         Prior to this decision, our law was unclear whether an employer could consider prior salary, either alone or in combination with other factors, when setting its employees' salaries. We took this case en banc in order to clarify the law, and we now hold that prior salary alone or in combination with other factors cannot justify a wage differential. To hold otherwise-to allow employers to capitalize on the persistence of the wage gap and perpetuate that gap ad infinitum-would be contrary to the text and history of the Equal Pay Act, and would vitiate the very purpose for which the Act stands.

         Fresno County Office of Education ("the County")^[2] does not dispute that it pays Aileen Rizo ("Rizo") less than comparable male employees for the same work. However, it argues that this wage differential is lawful under the Equal Pay Act. In relevant part, the Act provides,

No employer having employees subject to any provisions of this section shall discriminate, within any establishment in which such employees are employed, between employees on the basis of sex by paying wages to employees in such establishment at a rate less than the rate at which he pays wages to employees of the opposite sex in such establishment for equal work on jobs the performance of which requires equal skill, effort, and responsibility, and which are performed under similar working conditions, except where such payment is made pursuant to (i) a seniority system; (ii) a merit system; (iii) a system which measures earnings by quantity or quality of production; or (iv) a differential based on any other factor other than sex.

29 U.S.C. § 206(d)(1) (emphasis added). The County contends that that the wage differential is based on the fourth exception-the catchall exception: a "factor other than sex." It argues that an employee's prior salary can constitute a "factor other than sex" within the meaning of the catchall exception. However, this would allow the County to defend a sex-based salary differential on the basis of the very sex-based salary differentials the Equal Pay Act was designed to cure. Because we conclude that prior salary does not constitute a "factor other than sex, " the County fails as a matter of law to set forth an affirmative defense. We affirm the district court's denial of summary judgment to the County and remand for proceedings consistent with this opinion.^[3]

         Background

         Aileen Rizo was hired as a math consultant by the Fresno County Office of Education in October 2009. Previously, she was employed in Maricopa County, Arizona as a middle and high school math teacher. In her prior position, Rizo earned an annual salary of $50, 630 for 206 working days. She also received an educational stipend of $1, 200 per year for her master's degrees in educational technology and mathematics education.

         Rizo's new salary upon joining the County was determined in accordance with the County's Standard Operating Procedure 1440 ("SOP 1440"), informally adopted in 1998 and formally adopted in 2004. The County's hiring schedule consists of 10 stepped salary levels, each level containing 10 salary steps within it. SOP 1440 dictates that a new hire's salary is to be determined by taking the hired individual's prior salary, adding 5%, and placing the new employee on the corresponding step of the salary schedule. Unlike the County's previous hiring schedule, SOP 1440 does not rely on experience to set an employee's initial salary. SOP 1440 dictated that Rizo be placed at step 1 of level 1 of the hiring schedule, corresponding to a salary of $62, 133 for 196 days of work plus a master's degree stipend of $600.

         During a lunch with colleagues in 2012, Rizo learned that her male colleagues had been subsequently hired as math consultants at higher salary steps. In August 2012, she filed a complaint about the pay disparity with the County, which responded that all salaries had been set in accordance with SOP 1440. The County claimed to have reviewed salary-step placements of male and female management employees for the past 25 years (so including before the policy was even informally adopted), finding that SOP 1440 placed more women at higher compensation steps than males. Rizo disputes this analysis and claims that the data show men were placed at a higher average salary step.

         Rizo sued Jim Yovino in his official capacity as the Superintendent of the Fresno County Office of Education in February 2014. She claimed a violation of the Equal Pay Act, 29 U.S.C. § 206(d); sex discrimination under Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq. ("Title VII"); sex discrimination under California Government Code § 12940(a); and failure to prevent discrimination under California Government Code § 12940(k). Rizo v. Yovino, No. 1:14-cv-0423-MJS, 2015 WL 9260587, at *1 (E.D. Cal. Dec. 18, 2015), vacated, 854 F.3d 1161 (9th Cir.), reh'g en banc granted, 869 F.3d 1004 (9th Cir. 2017).

         In June 2015, the County moved for summary judgment. It asserted that, although Rizo was paid less than her male counterparts for the same work, the discrepancy was based on Rizo's prior salary. The County contended that her prior salary was a permissible affirmative defense to her concededly lower salary than her male counterparts under the fourth, catchall clause, a "factor other than sex." Rizo, 2015 WL 9260587, at *7. The district court denied summary judgment, reasoning that SOP 1440 "necessarily and unavoidably conflicts with the EPA" because "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." Id. at *9. It certified the legal question for interlocutory appeal, recognizing that denying summary judgment for the County "effectively resolves the issue of liability on Plaintiff's claims in her favor." Id. at *12.^[4]

         This Court granted the County's petition for permission to file an interlocutory appeal. The three-judge panel vacated the denial of summary judgment and remanded. Rizo v. Yovino, 854 F.3d 1161, 1167 (9th Cir.), reh'g en banc granted, 869 F.3d 1004 (9th Cir. 2017). The panel concluded that Kouba v. Allstate Insurance Co., 691 F.2d 873 (9th Cir. 1982) was controlling and that it permits prior salary alone to constitute a "factor other than sex" under the Equal Pay Act. In Kouba, the employer considered prior salary along with other factors, "including 'ability, education, [and] experience, '" in setting employees' salaries. Rizo, 854 F.3d at 1166 (quoting Kouba, 691 F.2d at 874). The panel concluded, however, that because Kouba "did not attribute any significance to Allstate's use of these other factors, " that case permits consideration of prior salary alone, as long as use of that factor "was reasonable and effectuated some business policy." Id. Because it believed it was compelled to follow Kouba, the panel directed the district court on remand to consider the reasonableness of the County's proffered business reasons for its reliance on prior salary.

         We granted the petition for rehearing en banc in order to clarify the law, including the vitality and effect of Kouba.

         Standard of Review

         We review the district court's denial of summary judgment de novo. Diaz v. Eagle Produce Ltd. P'ship, 521 F.3d 1201, 1207 (9th Cir. 2008). Summary judgment is available only when there are no genuine disputes of material fact and the movant is entitled to judgment as a matter of law. Id.

         Discussion

         Congress enacted the Equal Pay Act in 1963 to put an end to the "serious and endemic problem of employment discrimination in private industry" and to carry out a broad mandate of equal pay for equal work regardless of sex. Corning Glass Works v. Brennan, 417 U.S. 188, 195 (1974). It set forth a simple structure to carry out this simple principle. See 29 U.S.C. § 206(d)(1). A plaintiff must show that her employer has paid male and female employees different wages for substantially equal work. Not all differentials in pay for equal work violate the Equal Pay Act, however. The Act includes four statutory exceptions-"(i) a seniority system; (ii) a merit system; (iii) a system which measures earnings by quantity or quality of production; or (iv) a differential based on any other factor other than sex"- which operate as affirmative defenses. Id.; Corning, 417 U.S. at 196; Maxwell v. City of Tucson, 803 F.2d 444, 446 (9th Cir. 1986). "[A]n employer [must] submit evidence from which a reasonable factfinder could conclude not simply that the employer's proffered reasons could explain the wage disparity, but that the proffered reasons do in fact explain the wage disparity." EEOC v. Md. Ins. Admin., 879 F.3d 114, 121 (4th Cir. 2018) (first citing Stanziale v. Jargowsky, 200 F.3d 101, 107-08 (3d Cir. 2000); and then citing Mickelson v. N.Y. Life Ins. Co., 460 F.3d 1304, 1312 (10th Cir. 2006)); see also 29 U.S.C. § 206(d)(1) (exempting from liability wage differentials only where payment of which was "made pursuant to" an enumerated exception (emphasis added)).

         The Equal Pay Act "creates a type of strict liability" for employers who pay men and women different wages for the same work: once a plaintiff demonstrates a wage disparity, she is not required to prove discriminatory intent. Maxwell, 803 F.2d at 446 (quoting Strecker v. Grand Forks Cty. Social Serv. Bd., 640 F.2d 96, 99 n.1 (8th Cir. 1980) (en banc)). The County and Amicus Center for Workplace Compliance contend that the Supreme Court in Washington County v. Gunther, 452 U.S. 161 (1981), infused into Equal Pay Act law Title VII's disparate treatment analysis. This is clearly wrong. In Ledbetter v. Goodyear Tire & Rubber Co., Inc., the Supreme Court stated, "the EPA does not require . . . proof of intentional discrimination." 550 U.S. 618, 641 (2007).^[5] More recently, the Fourth Circuit reaffirmed that "[a]n EPA plaintiff need not prove that the employer acted with discriminatory intent to obtain a remedy under the statute." Md. Ins. Admin., 879 F.3d at 120 (collecting cases). Accordingly, pretext as it is understood in the Title VII context plays no role in Equal Pay Act claims.^[6]

         Here, the County does not dispute that Rizo established a prima facie case and that none of the three specific statutory exceptions applies. The County urges instead that the fourth catchall exception, "any other factor other than sex, " includes an employee's prior salary and applies when her starting salary is based on her prior salary. It acknowledges that if it is wrong, it has no defense to Rizo's Equal Pay Act claim.

         The question in this case is the meaning of the catchall exception. This is purely a question of law. We conclude, unhesitatingly, that "any other factor other than sex" is limited to legitimate, job-related factors such as a prospective employee's experience, educational background, ability, or prior job performance. It is inconceivable that Congress, in an Act the primary purpose of which was to eliminate long-existing "endemic" sex-based wage disparities, would create an exception for basing new hires' salaries on those very disparities-disparities that Congress declared are not only related to sex but caused by sex. To accept the County's argument would be to perpetuate rather than eliminate the pervasive discrimination at which the Act was aimed. As explained later in this opinion, the language, legislative history, and purpose of the Act make it clear that Congress was not so benighted. Prior salary, whether considered alone or with other factors, is not job related and thus does not fall within an exception to the Act that allows employers to pay disparate wages. Reflecting the very essence of the Act, we hold that by relying on prior salary, the County fails as a matter of law to set forth an affirmative defense.

         A.

         Allowing an employer to justify a wage differential between men and women on the basis of prior salary is wholly inconsistent with the provisions of the Equal Pay Act.^[7] As the Supreme Court has emphasized, "[t]he Equal Pay Act is broadly remedial, and it should be construed and applied so as to fulfill the underlying purposes which Congress sought to achieve." Corning, 417 U.S. at 208. The remedial purpose of the Act is clear: to put an end to historical wage discrimination against women. Representative Florence Dwyer said in support of the bill: "The issue here is really a very simple one-the elimination of one of the most persistent and obnoxious forms of discrimination which is still practiced in this enlightened society."^[8] Representative Harold Donohue in his comments on the bill stressed a similar point: "[T]his measure represents the correction of basic injustice being visited upon women in many fields of endeavor . . . ."^[9] In other words, the Equal Pay Act was not intended to be a passive measure but a proactive one designed to correct salary structures based on the "outmoded belief" that women should be paid less than men. See Corning, 417 U.S. at 195 (quoting S. Rep. No. 88-176, at 1 (1963)).

         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. 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.

         Today we express a general rule and do not attempt to resolve its applications under all circumstances. We do not decide, for example, whether or under what circumstances, past salary may play a role in the course of an individualized salary negotiation. We prefer to reserve all questions relating to individualized negotiations for decision in subsequent cases. Our opinion should in no way be taken as barring or posing any obstacle to whatever resolution future panels may reach regarding questions relating to such negotiations.^[10]

         B.

         Basic principles of statutory interpretation also establish that prior salary is not a permissible "factor other than sex" within the meaning of the Equal Pay Act. The County maintains that the catchall exception unambiguously provides that any facially neutral factor constitutes an affirmative defense to liability under the Equal Pay Act. It is incorrect. The Supreme Court in Corning did not find the Act clear on its face. Rather, that decision applied an analytical framework similar to the one we use here by looking to the history of the legislative process of the Equal Pay Act as well as the context in which the Act was adopted. 417 U.S. at 198-203. Following a similar method of analysis, it is clear that when the catchall exception is read in light of its surrounding context and legislative history, a legitimate "factor other than sex" must be job related and that prior salary cannot justify paying one gender less if equal work is performed.

         1.

         The Act "establishes four exceptions-three specific and one a general catchall provision." Corning, 417 U.S. at 196. Where, as here, a statute contains a catchall term at the end of a list, we rely on the related principles of noscitur a sociis and ejusdem generis to "cabin the contextual meaning" of the term, and to "avoid ascribing to [that term] a meaning so broad that it is inconsistent with its accompanying words, thus giving unintended breadth to the Acts of Congress." Yates v. United States, 135 S.Ct. 1074, 1085-86 (2015) (plurality opinion) (quoting Gustafson v. Alloyd Co., 513 U.S. 561, 575 (1995)); id. at 1089 (Alito, J., concurring in judgment) (applying noscitur a sociis and ejusdem generis).

         The canon noscitur a sociis-"a word is known by the company it keeps"-provides that words grouped together should be given related meaning. Id. at 1085 (plurality opinion). Here, the catchall phrase is grouped with three specific exceptions based on systems of seniority, merit, and productivity. These specific systems share more in common than mere gender neutrality; all three relate to job qualifications, performance, and/or experience. It follows that the more general exception should be limited to legitimate, job-related reasons as well.

         A related canon, ejusdem generis, likewise supports our interpretation of the catchall term. We apply this canon when interpreting general terms at the end of a list of more specific ones. Id. at 1086. In such a case, "the general words are construed to embrace only objects similar in nature to those objects enumerated by the preceding specific words." Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 109, 114- 15 (2001) (quoting 2A Norman J. Singer, Sutherland on Statutes and Statutory Construction § 47.17 (1991)). The inclusion of the word "other" before the general provision in the Equal Pay Act makes its meaning all the more clear: "[T]he principle of ejusdem generis . . . implies the addition of similar after the word other." Antonin Scalia & Bryan A. Garner, Reading Law: The Interpretation of Legal Texts 199 (2012). Here, we read the statutory exceptions as: "(i) a seniority system, (ii) a merit system, (iii) a system which measures earnings by quantity or quality of production; or (iv) a differential based on any other [similar] factor other than sex." 29 U.S.C. § 206(d)(1). A similar factor would have to be one similar to the other legitimate, job-related reasons.

         The presence of the word "any"-which the County contends indicates the expansive reach of the fourth statutory exception-does not counsel against our interpretation. In Circuit City Stores, for example, the Supreme Court interpreted § 1 of the Federal Arbitration Act, which lists "seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce" to include only transportation workers, not workers in literally any industry. 532 U.S. at 109, 114-15 (emphasis added) (quoting 9 U.S.C. § 1); see also, e.g., In re Indian Gaming Related Cases, 331 F.3d 1094, 1113-14 (9th Cir. 2003) (adopting district court's use of ...