Female Fails to Prove Wage Discrimination Based on Prior Salary

The case is Muriel v. SCI Arizona Funeral Services decided October 30, 2014 by District Court Judge Douglas L. Rayes of the District Court of Arizona (2015 U.S. Lexis 147510).  The case is not important so much for the outcome, which was summary judgment for SCI.  Rather, its importance is in relation to the role of prior salary in deciding wage discrimination claims in both the Equal Pay Act (EPA) and Title VII.

The facts of the case are that Muriel was a long-time worker in the funeral home industry who had a degree in mortuary science and was a licensed funeral director.  Her initial job at SCI was as an embalmer at $19 per hour.  She was then promoted to Location Manager at a salary of $52,000 and received two raises to a salary of $54,262.  She then requested a demotion to Funeral Director, which paid $21 per hour.  She then resigned her position and filed an EPA claim that her two replacements, both male, were hired at higher salaries than what she received.  One of the males (Beavers) was hired as Location Manager at a salary of $58,000 and the other male (McCormack) was hired as Funeral Director at $22 per hour.  It was clear that the two jobs in question were substantially equal; the only issue is whether there was a legitimate defense for the wage differences.

SCI’s defense was that the wage differences were due to factors other than sex (FOS), the most commonly used of four statutory defenses from the EPA statute.   Beavers was first offered $54,000 for Location Manager, which was less than Muriel made before stepping down.  However, he was already making $57,000 in a prior position and negotiated a $58,000 salary.  Beavers then hired McCormick as Funeral Director at $22 per hour.  SCI argued two things: (1) there was an urgency to hire a new Funeral Director; and (2) McCormick was already making $21.63 per hour and he and Beavers rounded that figure to $22 per hour.  Thus, SCI satisfied the FOS defense for both positions.

So why is the case important?  In rendering his ruling, Judge Rayes cited Kouba v. Allstate (1982) in which a class of female plaintiffs sued Allstate because of its policy of using prior salary to dictate starting salary.  This was a Title VII claim of wage discrimination, which, in the early 1980s, were decided using EPA rules.  The plaintiffs claimed that this policy had a discriminatory effect on women, which, in essence, is an adverse impact claim.  The 9th Circuit ruled that prior salary could serve as an FOS if used “reasonably in light of the employer’s stated purpose as well as its other practices.”   In other words, the Kouba defense is, in effect, a business necessity defense.

In Kouba, the prior salary was for a different prior job in a different company.

In comparison, in Covington v. Southern Illinois University (SUI) (1987), an EPA case, Covington was an art advisor at SIU working toward her MA degree who challenged the salary she was offered for a different job SIU after obtaining her MA degree.  The 7th Circuit, disagreeing with the Kouba ruling sanctioned the FOS defense for SIU because  “the wage policy of only the present employer is involved, any presumption of prior discrimination has no place.”  Additionally, the 7th Circuit stated:

The ninth Circuit proceeded as if the Equal Pay Act worked like the disparate-impact theory under Title VII: if the plaintiff shows that an employment practice adversely affects protected workers as a group, then the employer must provide a strong reason (“business necessity”) for the practice. … An analogy to disparate-impact litigation under Title VII does not justify a “business reason” requirement under the Equal Pay Act, however, because the Equal Pay Act deals exclusively with disparate treatment. It does not have a disparate impact component.

There have been other cases on prior salary; too many to detail in a blog.  The bottom line is that four circuit courts have endorsed the Kouba standard, whereas two circuit courts have endorsed the Covington standard.  So the question going forward is will any factor other than sex constitute an FOS in the EPA regardless of what it is (Covington), or does it have to satisfy the Kouba standard (job relatedness)?

My own opinion is that should the Supreme Court decide to tack this issue some day, the Kouba standard could work for Title VII, but not for the EPA.

By Art Gutman, Ph.D., Professor, Florida Institute of Technology

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