Most people are aware of Equal Pay Day, which is the approximate day the average woman in the United States must work into the new year to make what the average man made the previous year. In 2018, that day was April 10, meaning the average woman makes $0.80 for every $1 the average man makes. The numbers are, not surprisingly, substantially worse for women of color. What is much less well known is that even in 2018, this persistent wage gap exists even in the legal profession—the very profession tasked with rectifying the unequal treatment of women. Major, Lindsey & Africa’s 2016 law firm partner compensation survey reported average compensation for male partners was 44 percent higher than for female partners. And its 2017 in-house compensation report showed that male general counsel received 17.5 percent higher total compensation than female GCs, and female non-GCs earned 8.2 percent less total compensation than their male counterparts. Law firm associates fare no better. According to a 2014 study by Sky Analytics, female associates make 77 percent of what male associates make.
How is it that more than 50 years after passage of the Equal Pay Act, such pernicious gender pay disparity continues to exist even in the legal profession? While there may be many legitimate business-related reasons for lawyers to be compensated differently, at least some of the blame for this insidious pay gap must be attributed to historical gender discrimination. How can that be? For starters, although women make up roughly half of all law students, studies show that only 45 to 46 percent of students enrolled in the top-tier schools were female. Students from these top-tier schools are more likely to find full-time J.D.-required jobs after graduation and jobs at large law firms that pay the highest salaries. But it doesn’t stop there. Even if male and female attorneys are paid the same first-year base salary, a gap can quickly develop and widen. For example, if a third-year female associate begins a six-month parental leave in October and returns to work in April, she may be told her compensation upon return will continue to be as a third-year attorney. And because she may be slow in ramping back up, or may decide to work part-time for a few months, her annual bonus will be substantially less, if not nonexistent. If that same associate decides to take a job as in-house counsel, which sets her pay based on the pay at her last job, she is now starting that position at a salary that is substantially lower than her male counterparts who did not take parental leave, even if she went to a better law school, got better grades, and had better performance evaluations. Can anything be done? Both the California Legislature and the U.S. Court of Appeals for the Ninth Circuit believes it can. California’s Fair Pay Act, like the Equal Pay Act, generally prohibits employers from paying employees less than the wages paid to employees of the opposite sex for comparable work. Both statutes are strict liability statutes, meaning an employee does not need to prove intentional discrimination—the pay disparity is proof of the discrimination, which the employer can only rebut by proving the wage disparity is based on one of the enumerated, non-discriminatory factors.
Under both state and federal law, there is a catchall factor for employers to avoid liability for pay discrimination. California’s Fair Pay Act provides a defense if the pay differential is based on a “bona fide factor other than sex,” but expressly provides that the factor other than sex must be “job related with respect to the position in question, and … consistent with a business necessity.” In 2017, California’s Legislature amended the Fair Pay Act to provide that “prior salary shall not, by itself, justify any disparity in compensation.”
The federal Equal Pay Act provides a similar defense, if the pay differential is “based on any other factor other than sex” but, unlike California law, on its face does not require that the “factor other than sex” be a factor related to the job and does not prohibit an employee’s salary history from being such a factor.
However, in an en banc decision issued the day before Equal Pay Day, the Ninth Circuit interpreted the Equal Pay Act’s statutory text to be even broader than California’s law. In Rizo v. Yovino, written by the Ninth Circuit’s “liberal lion” Stephen Reinhardt prior to his death, the court held that a “factor other than sex” can only be a “legitimate, job-related factor” such as education, experience or performance. Importantly, the court ruled that does not include an employee’s prior salary, even if prior salary is considered along with other factors. The court concluded that to allow an employer to base a new employee’s starting salary on her prior salary “would be to perpetuate rather than eliminate the pervasive discrimination at which the act was aimed.” The court specifically noted that prior salary “perpetuates the very gender-based assumptions about the value of work that the Equal Pay Act was designed to end … whether prior salary is the sole factor or one of several factors considered in establishing employees’ wages.” In this way, the Ninth Circuit has gone beyond California law, which does not prohibit any consideration of prior salary, as long as it is used in conjunction with other job-related factors.
California law may very well be moving in the same direction, however. California’s Fair Pay Act already requires that the catch-all “factor other than sex” be job related, and the Rizo court makes a compelling case for why prior salary is not directly job related but, at best, a proxy for other legitimate job-related factors. Further, in 2017, Gov. Jerry Brown signed AB 168, adding Section 432.3 to the Labor Code, which should help stop the perpetuation of gender pay discrimination that continues to exist by expressly prohibiting employers from asking a potential employee about her prior salary history. And Sen. Hannah-Beth Jackson has authored SB 1284 this year, which would require employers of 100 or more people to submit an annual pay data report by gender, race, ethnicity and job category to the Department of Industrial Relations.
How will these changes to the law affect the legal profession? Initially, the impact will be seen primarily for attorneys who change jobs—moving to a law firm from the government or public interest sector, moving from one law firm to another, or moving to or from an in-house position. And while the laws do not apply to equity partners, who are not employees, they should start to equalize salaries for non-equity partners. If prior salary cannot be considered, employers will be forced to set salaries at equal levels for equal work. Down the road, particularly if the annual reporting requirement becomes law, lawyers will have much more visibility into a potential employer’s pay structure, which will impact recruiting and mobility.
As Judge Reinhardt so eloquently stated: “Although the [Equal Pay] Act has prohibited sex-based wage discrimination for more than 50 years, the financial exploitation of working women embodied by the gender pay gap continues to be an embarrassing reality of our economy.” The fact that a substantial pay gap continues to exist in the legal profession, which should be a leader in eradicating discrimination, is shameful. California labor laws and the Ninth Circuit’s Rizo decision will not immediately remedy gender pay discrimination in any industry or occupation, but hopefully these actions will begin to reverse the trend and start to level the playing field going forward.
On Appeals is a monthly column by the attorneys of the California Appellate Law Group, the largest appellate specialty boutique in Northern California. Kelly Woodruff is of counsel with the firm. She has clerked in both the U.S. Court of Appeals for the Ninth Circuit and the U.S. District Court for the District of Hawaii. Find out more about Woodruff and the California Appellate Law Group at www.calapplaw.com.