*Nicole Tronolone

11 Wake Forest L. Rev. Online 21 (Opens PDF in New Tab)

I.      Introduction

President John F. Kennedy signed the Equal Pay Act into law on June 10, 1963, remarking that such legislation constituted a “significant leap forward.”[1]  Advocates of the bill heralded the legislation as “a matter of simple justice” ensuring that “there is no longer any excuse for paying women less than men for performing the same work, if there ever was any.”[2]  Today, more than fifty years after Congress enacted the legislation, the pay gap persists.  In 1963, when the law was enacted, women earned $0.59 to a dollar earned by men.[3]  In 2018, fifty-five years later, women earned only $0.81 to a dollar earned by men—evidencing only meager progress towards closing the gender pay gap.[4]  The persistence of the gap is, in part, created by the sustained use of prior salary information in setting employee compensation rates for new employees.[5]  Currently, federal courts are split in their interpretation of a critical catch-all phrase in the Equal Pay Act (“EPA”)—an exception that permits an employer to pay individuals of different sexes disparate salaries for substantially equal work so long as the differential is based on a “factor other than sex.”[6]  Employers have used this exception as justification for relying on prior salary history.  Use of salary history inquiries, however, serves to perpetuate the wage gap, locking women into cycles of lower pay and “piling on” wage disparity from job to job.[7]

Prior to the Ninth Circuit’s 2018 en banc decision in Rizo v. Yovino,[8] federal courts had articulated three general approaches to the catch-all exception to the EPA.  The Seventh Circuit’s pro-employer approach unequivocally permits the use of prior salary as either a standalone factor or in conjunction with other factors, creating a broad interpretation of the exception.[9]  The Eighth Circuit has taken a slightly more restrictive approach, allowing the use of prior salary as the sole determinant of new salary but implementing a case-by-case reasonableness inquiry.[10]  In contrast, the Tenth and Eleventh Circuits greatly limit the use of prior salary history, holding that the use of such information as the sole factor in setting an employee’s compensation violates the EPA.[11]  The Ninth Circuit’s 2018 en bancdecision created a fourth category—the most restrictive interpretation of the EPA—prohibiting the use of salary history entirely.[12]  Although many hoped the Supreme Court would resolve the split, after granting certiorari, the Court vacated and remanded Rizo on purely procedural grounds.[13]  In early 2020, the Ninth Circuit reheard the case en banc, and issued a majority opinion that echoed the previous decision: Prior salary may not be considered in salary determinations.  The Supreme Court has since declined to resolve the issue, leaving the circuit split unresolved and employers in an uncertain position, particularly those who may be subject to conflicting circuit interpretations and a dizzying array of local and state laws prohibiting or limiting the use of salary history inquiries.[14]

This Comment will first provide an overview of the history and text of the EPA, including the Supreme Court’s interpretation of the claim structure and available defenses for employers.  Next, this Comment will detail the current status of the circuit split on this issue.  This Comment will argue that the majority reasoning articulated in the Ninth Circuit’s 2020 en banc decision in Rizo is the best approach to resolving the ambiguity surrounding the “factor other than sex” exception to the EPA.  Finally, this Comment will analyze the impact the split has on employers as well as the benefits created by broad prohibitions on the use of salary history.

II.    Gender Wage Gap and the EPA

The origins of the EPA can be traced to the influx of female workers into the economy during World War II in response to severe labor shortages.[15]  Following the war, men returning home displaced women from their wartime roles, sending the number of women in the workplace back to pre-World War II levels.[16]  Women who managed to remain in the workforce were often reclassified into new roles and suffered decreased wages.[17]  By 1963, women made an average of $21,959 per year, compared to an average annual male salary of $37,253—a 41.1 percent wage gap.[18]

Although several bills were introduced throughout the 1950s advocating for equal pay,[19] equal pay legislation did not gain significant traction until the Kennedy administration.  President Kennedy signed the EPA into law as an amendment to the Fair Labor Standards Act on June 10, 1963, characterizing it as merely a “first step” towards economic equality.[20]

Despite the EPA’s egalitarian promise of equal pay for equal work, the wage gap persists today, more than fifty years after the legislation’s enactment.  The wage gap has moderately narrowed since 1963,[21] but the rate of change has slowed significantly since 2001.[22]  At the current rate women are not expected to receive pay parity until 2106.[23]  Women of color experience an even greater disparity, with African-American and Latina women making $0.63 and $0.55 to the dollar, respectively, when compared with non-Hispanic white men.[24]  Over the course of a forty-seven year career, a female college graduate will earn roughly $1.2 million less than a white male college graduate.[25]  These figures highlight the importance of a consistent and transparent approach to the EPA’s protections.[26]

In Corning Glass Works v. Brennan,[27] the Supreme Court stressed that the EPA was not meant to be a passive prohibition on discrimination, but rather Congress’s remedy to  the “endemic problem”[28] of different wage structures “based on an ancient but outmoded belief that a man, because of his role in society, should be paid more than a woman even though his duties are the same.”[29]  The solution to such a problem is to require that “equal work . . . be rewarded by equal wages.”[30]  The Court has characterized congressional intent for the EPA to be “more than a token gesture to end discrimination”[31] and advised that the broad remedial nature of the statute be “construed and applied so as to fulfill the underlying purposes which Congress sought to achieve.”[32]

Under the EPA, employers are prohibited from discriminating between employees on the basis of sex in the wage rate for equal work unless the wage differential 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.”[33]  Through this language, the EPA provides for four exceptions to the equal pay for equal work mandate of the legislation.[34]  The fourth exception, a catch-all category providing for “any other factor other than sex,” is the subject of the current circuit split, with courts differing in their interpretations of whether salary history falls within the exception.

To establish his or her prima facie case under the EPA, a plaintiff must demonstrate “that an employer paid different wages to employees of opposite sexes ‘for equal work on jobs the performance of which are performed under similar working conditions.’”[35]  Once the plaintiff has established his or her prima facie case, the burden shifts to the employer to prove the differential was made pursuant to one of the statutory exceptions.[36]  Although the Supreme Court has characterized the proof structure of the EPA as “straightforward,”[37] deciphering the implications of a “factor other than sex” has proved otherwise.

III.   Circuit Split: Is Salary History a “Factor Other Than Sex” Under the EPA’s Affirmative Defenses?

A.     Seventh Circuit: Salary History Is Unequivocally a “Factor Other Than Sex”

In addressing the scope of the catch-all exception the Seventh Circuit has adopted the broadest construction of “factor other than sex,” holding that “wages at one’s prior employer are a ‘factor other than sex’ and . . . an employer may use them to set pay consistently with the Act.”[38]  Disapproving of any approach that requires a court to second-guess the motivations of an employer’s use of a “factor other than sex,” the Seventh Circuit emphasizes “Section 206(d) does not authorize courts to set their own standards of ‘acceptable’ business practices.  The statute asks whether the employer has a reason other than sex—not whether it has a ‘good’ reason.”[39]  Under this approach salary history always constitutes a “factor other than sex,” enabling an employer to assert an affirmative defense under the EPA to liability for sex-based wage differentials.[40]

B.    Eighth Circuit: Case-by-Case Analysis of the Use of Prior Salary History

Similarly, the Eighth Circuit does not recognize a blanket prohibition against the use of prior salary.[41]  In contrast to the Seventh Circuit’s approach, the Eighth Circuit acknowledges the potential for employers to use prior salary history in a discriminatory manner.[42]  Despite this concern, the Eighth Circuit has held that such opportunity for misuse does not warrant a per se prohibition against the use of salary history policies.[43]  Rather, courts must undertake careful examination of the record to ensure the employer is not relying on the “market forces” theory “to justify lower wages for female employees simply because the market might bear such wages.”[44]  By requiring a case-by-case reasonableness assessment of an employer’s use of the “factor other than sex” defense, the Eighth Circuit adopts a slightly narrower interpretation of the EPA exception, though one largely supportive of the use of salary history policies.

C.    Tenth and Eleventh Circuits: The Use of Salary History Alone in Setting Compensation Does Not Constitute a “Factor Other Than Sex”

Before the Ninth Circuit’s en banc decision completely prohibiting the use of salary history, the Tenth and Eleventh Circuits had adopted the most restrictive interpretations of a “factor other than sex.”[45]  The approach shared by these circuits permits the use of salary history only when used in conjunction with additional factors.[46]  Although an employer may consider an applicant’s prior salary, a pay disparity may not be premised on this factor alone.[47]

D.    Ninth Circuit: En Banc Decision Prohibits Any Use of Salary History

In its 2018 en bancdecision in Rizo v. Yovino, the Ninth Circuit overturned existing circuit precedent and adopted an approach even more restrictive than that of the Tenth and Eleventh Circuits.[48]  A few months later the Supreme Court granted certiorari for Yovino v. Rizo, and it appeared as though the circuit split regarding the interpretation of “factor other than sex” would finally be resolved.[49]  The Supreme Court, however, vacated the case on a distinct procedural posture issue and avoided the EPA question entirely.[50]  Following the remand, the Ninth Circuit reheard the case en banc, and issued an opinion reaffirming its restrictive approach: employers may not use salary history when determining pay levels.[51]

In February 2014, Plaintiff Aileen Rizo filed suit against Defendant Jim Yovino in his official capacity as Superintendent of Fresno County Office of Education (“FCOE”).[52]  Rizo filed four causes of action including violation of the EPA and sex discrimination under Title VII.[53]  In 2009, Rizo applied for, and was offered, a position as a math consultant in FCOE’s Science, Technology, Engineering, and Mathematics program.[54]  In accordance with FCOE’s Standard Operating Procedure 1440, Rizo’s initial salary was determined by adding 5 percent to her most recent salary and placing her on Step 1 of the county’s salary schedule.[55]  Three years later, Rizo learned of a male colleague who had just been hired by FCOE as a math consultant but placed on Step 9 of the salary schedule.[56]  Rizo argued she established her prima facie case for an EPA claim by showing that she, a woman, was placed on a lower salary schedule step than a male employee hired to perform substantially the same work.[57]  The County did not dispute that Rizo had satisfied her prima facie case, thereby shifting the burden to the County to prove the wage disparity resulted from one of the EPA’s four available exceptions.[58]  The County argued that since it had used her salary history in application of its standard operating procedure, the differential fell within the catch-all exception of a “factor other than sex” and thus was permissible.[59]

The district court acknowledged it was placed in the unique position of interpreting whether the use of prior salary alone properly fell within the catch-all exception.[60]  The court distinguished Rizo from Ninth Circuit precedent[61] in Kouba v. Allstate.[62]  In Kouba, the Ninth Circuit held, “the Equal Pay Act does not impose a strict prohibition against the use of prior salary.”[63]  Noting that the employer in Kouba relied on multiple factors in setting an employee’s salary, the district court differentiated Rizo as the County determined her new salary solely through the use of her prior salary.[64]  Thus, the district court found that the standard operating procedure violated the EPA and denied FCOE’s motion for summary judgement.[65]

FCOE petitioned for, and was granted, interlocutory appeal from the district court’s order denying summary judgment.[66]  The three-judge panel of the Ninth Circuit found that the case was controlled by Kouba, rejecting any strict prohibition on salary history, and vacated and remanded the district court’s order.[67]

In late 2017, the Ninth Circuit granted Rizo’s petition for a rehearing en banc to determine the continued applicability of Kouba.[68]  All eleven circuit court judges agreed that an employer’s use of prior salary alone to set an employee’s new salary violates the EPA, and thus Fresno County’s standard operating procedure was impermissible.[69]  Beyond this however, the circuit was severely split in its reasoning regarding the limits of the catch-all exception, a “factor other than sex.”[70]  Authoring the six-judge majority opinion, Judge Stephen Reinhardt held that the EPA prohibits an employer from relying on prior salary as a justification, either alone or in conjunction with other factors, for a wage differential between male and female employees.[71]  Relying on the text, history, and purpose of the EPA, Judge Reinhardt explicitly overruled Kouba, refuting the Ninth Circuit’s prior contention that reliance on prior salary is job related and therefore permissible under the catch-all exception.[72]  The United States Supreme Court granted certiorari to review the en bancdecision.[73]  Although many employers hoped for a resolution of the uncertainty surrounding the exception,[74] the Supreme Court’s per curiam opinion was entirely focused on the resolution of a different question.[75]  Because the Ninth Circuit’s decision was issued eleven days after the death of Judge Stephen Reinhardt, the Supreme Court held the use of his vote rendered the decision void and vacated the en bancjudgment, remanding for further proceedings.[76]

Upon remand, the Ninth Circuit reconsidered FCOE’s appeal en banc in early 2020.[77]  Similar to the decision issued in 2018, all eleven judges agreed that FCOE’s use of prior salary as the sole factor in setting Rizzo’s salary violated the EPA.  However, the judges remained split over the consideration of prior salary in conjunction with other factors.

The majority opinion, authored by Judge Christen, incorporated the arguments advanced by Judge Reinhardt.  Starting with the text of the EPA, the majority argues each word of the statute—”any other factor other than sex”[78]—should be given effect and concludes that the catch-all defense is limited to job-related factors.[79]  Employing two canons of construction, noscitur a sociis and ejusdem generis, the majority held that the text of the EPA requires the catch-all to be job-related.[80]

The majority also looked to the legislative history and purpose of the EPA for additional support for its interpretation of the catch-all exception.  As emphasized in Corning Glass, Congress intended the EPA to remedy the “serious and endemic problem” of wage discrimination in private employment.[81]  After determining that the fourth exception includes only job-related factors, the majority concluded that prior pay is not such a job-related factor.[82]  This en banc decision ratifies the narrow scope of the catch-all provision previously articulated by the late Judge Reinhardt. Under the majority’s approach, prior salary may not be used in determining an employee’s salary as it serves no job-related purpose.[83]  This limiting construction, however, was not adopted by the entire circuit; the two concurrences criticize the extent of the majority’s ban on the use of prior salary, arguing it should be permitted in conjunction with other factors.[84]

In July 2020, the Supreme Court denied certiorari for the case, declining to resolve the circuit split.  As a result, circuits remain deeply divided on the legal question of whether prior salary constitutes a “factor other than sex” either alone or in combination with other factors and employers continue to face conflicting requirements.

IV.   The Impact of the Circuit Split on Employers

In response to the lack of clarity regarding the use of salary history on the federal level, and growing concerns regarding the role of salary history in perpetuating gender inequality, many states and localities have enacted legislation limiting the use of salary history in setting new employees’ salaries.[85]  The specifics of the legislation differ among jurisdictions, creating nuances that frustrate the development of a “one-size fits all approach to compliance.”[86]  Beyond the uncertainty created by the circuit split, employers are faced with a patchwork of state and local laws that further complicates a standard approach to recruiting.

For many employers, questions regarding salary history have long been a standard aspect of the hiring process.[87]  This type of inquiry quickly provides employers with information about a potential applicant early in the interview process.[88]  Salary history inquiries allow employers to remove from consideration those candidates with higher previous salaries than the amount budgeted for the job in question, while allowing candidates who previously earned less to be “snapped up at a bargain.”[89]  This early screening is considered to be the greatest advantage of using salary history to set new employees’ compensation.[90]  Salary history bans and interpretations of the EPA that exclude salary history as an available affirmative defense force employers to reconfigure hiring practices and compensation policies.[91]

To ensure compliance with the dynamic legal landscape regarding the use of salary history, many employers have proactively begun to eliminate these inquiries from their hiring procedures.[92]  For companies with national footprints and workforces, the necessity of a uniform hiring approach is critical.[93]  Rather than create a set of disparate hiring policies, each tailored to the unique requirements of the jurisdiction, these companies have sought to preempt any future changes.[94]  Nearly half of the executives surveyed in a 2017 study concerning the implications of salary history bans indicated that they would change their policies to comply with the most restrictive legislation rather than creating policies that vary by location.[95]  As a result, human resources experts forecast the elimination of salary history policies to emerge as a recruiting best practice.[96]  The need for a consistent interpretation of the EPA’s “factor other than sex” exception is important in providing employers with a clear mandate, one on which they can craft legal and enforceable policies.

A.     The Most Effective Interpretation of “Factor Other Than Sex”

The deepening circuit split and proliferation of state and local legislation on the topic beg the question: Which circuit approach should be adopted as the national standard, and to what extent, if at all, does salary history constitute a “factor other than sex” as an affirmative defense to gender wage disparities under the EPA?  The Ninth Circuit’s 2020 en bancdecision provides a bright-line rule for employers; consideration of salary history is not permitted under the EPA, either alone or in combination with other factors, in justifying a gender-based wage disparity.[97]  This approach, although by far the most narrow interpretation of the EPA’s “factor other than sex,” best reflects legislative history and conforms with the legislative text.  Furthermore, prohibiting the use of salary history in setting employee salary rates benefits employers and employees alike by shifting the basis of compensation to the skills, experience, and responsibilities of the candidate, a notable step in the right direction to eliminating gender pay inequity.

B.    Advantages of Ninth Circuit’s Approach

The complete prohibition on the use of salary history, adopted by the Ninth Circuit initially in 2018 and again in 2020, provides clear guidance to employers and reflects the original intent of the EPA.  A salary history inquiry “forces women and, especially women of color, to carry lower earnings and pay discrimination with them from job to job.”[98]  The EPA was designed to force employers to address explicit gender discrimination and justify any wage differentials.  Broad constructions of “factor other than sex” that permit reliance on salary history simply enable employers to perpetuate such discrimination without articulating a non-discriminatory reason for the disparity.

The text of the EPA’s catch-all affirmative defense allows employers to justify wage-based pay differentials if the disparity is due to any “factor other than sex.”[99]  At the time of the legislation’s enactment salary history was directly related to sex.  The extreme wage disparity of the mid-1960s, with women earning roughly $0.59 to a man’s $1.00 for substantially the same work, reflects this reality.[100]  The text of the EPA, as originally enacted, understood women’s salaries to be inherently gendered and the product of long-standing discrimination.  Because legislators at the time of the EPA’s passage considered women’s salaries to be a product of their sex, any interpretation of the catch-all exception that permits salary history as a “factor other than sex” is contrary to the original interpretation of the affirmative defenses available to employers.

In comparison to the approaches adopted by other circuits, the Ninth Circuit’s bright-line rule provides a decisive and reasoned interpretation of the catch-all exception.  The Seventh Circuit’s approach allows employers to perpetuate gender discrimination by locking women into a cycle of lower wages than their male colleagues, in direct contrast to the stated purposes of the EPA.  The Eighth Circuit’s case-by-case analysis leaves employers with a limited understanding as to how a court will evaluate a claimed affirmative defense.  Finally, the Tenth and Eleventh Circuits’ limited use of salary history, in conjunction with other factors, is redundant.  If an employer has an alternative criterion to justify a wage disparity, such as an applicant’s education or prior experience, then salary history should be rendered unnecessary.  In contrast, drawing from the text and purpose of the EPA, the Ninth Circuit’s approach provides clear direction for employers, prohibiting the use of salary history.

C.    Benefits to Employers from Eliminating Salary History Inquiry

Given the extent of changes to recruiting policies that are required to ensure compliance with judicial and legislative changes to the use of salary history, it is unsurprising that employers have been reluctant to adapt.  Without doubt, the adoption of the Ninth Circuit’s interpretation of “factor other than sex,” prohibiting any sort of reliance on salary history, will require significant alterations to recruiting processes.[101]  Lost in the current discourse concerning salary history bans, however, is a discussion of their potential advantages to employers.  Employers can incur both economic and non-monetary benefits from ending inquiries into applicants’ prior salaries.  Embracing salary history bans and reimagining human resources policies to ensure employees are compensated based on their experience and skills rather than their previous salaries can help employers recruit and retain top talent while limiting the expenses associated with a changing workforce.

1.     Monetary Benefits

Ending the use of salary history in compensation determinations can result in direct economic benefits for employers, including better valuation of skills, fewer wage discrimination lawsuits, and reduced employee turnover.

Although helpful in initial application reviews, salary history is largely unrelated to a candidate’s ability to do the job.[102]  Instead, employers should seek to “price the job, not the person.”[103]  Removing salary history questions from employment applications forces employers to identify the core knowledge and skill requirements of the job and measure the job’s value to the organization rather than simply relying on a previous employer’s perception of the position’s value.  Because past salary “often reflects the historical market forces which value the equal work of one sex over the other,” prior salary is an imperfect proxy for the market value of an applicant or a position.[104]  Through approaches intended to address the wage gap, such as pay audits and increased reliance on market data regarding compensation levels, employers will not only have a better sense of any wage gaps within their organization, but also a clearer understanding of the true “going-rate” of certain positions.

Furthermore, eliminating salary history inquiries protects employers from potential wage discrimination lawsuits.[105]  Beyond ensuring compliance with the complex legal landscape of salary history bans, removing this information from applications ensures employers have additional, defensible reasons for a wage differential such as an employee’s experience or education.[106]

Finally, employers benefit economically from the increased efficiency created by an engaged workforce with minimal employee turnover.  Shifting to more transparent pay structures, including eliminating the use of salary history data, improves employee engagement while decreasing the likelihood of turnover.[107]  Employees feel valued for their contributions and are more likely to perceive a sense of fairness and collaboration within an organization.[108]  The costs associated with employee turnover are substantial, with the costs to replace the employee approximating 20 percent of the employee’s salary.[109]  While changing recruiting approaches and human resources policies to eliminate the use of salary history create upfront expenses, employers stand to benefit economically from such changes long-term.

2.     Non-Monetary Benefits

Ending reliance on salary history also fosters non-monetary benefits for employers.  In addition to the advantages of a more engaged workforce, employers that do not rely on salary history are able to draw from a larger and more talented candidate pool and are perceived as better places to work.[110]  Recent research indicates that employers without access to prior salary data actually interview more applicants than those provided with such data.[111]  Instead of relying on prior salary as an indicator of productivity, employers ask more substantive questions regarding the applicant’s role at previous jobs, inquiring into the skills and responsibilities involved in former positions.[112]  By using prior salary as a screening mechanism, employers have effectively used this data as a proxy of an applicant’s interest in a position.[113]  This, however, limits an employer’s prospective applicant pool, shutting out potentially talented employees from even initial interviews.[114]  Those reentering the workforce, particularly female workers who have taken time off for familial reasons, are penalized if they choose to apply for lower-paying, less demanding roles.[115]  Non-monetary compensation, including greater benefits, flexibility, and paid time off, can be major selling points for certain applicants.[116]  The use of salary history, however, would exclude those same applicants from consideration despite their potential experience and value if their prior salaries are above the employer’s perceived cut-off.

Lastly, employers benefit from the positive public perception associated with eliminating the use of prior salary information.  As salary history bans become more widespread, applicants may view salary history inquiries negatively, perceiving them as a violation of privacy and assuming that disclosure of their salary would put them at a disadvantage.[117]  Although employees are open to discussing their salaries among friends and colleagues,[118] this type of inquiry from a prospective employer may come across as “intrusive and heavy-handed.”[119]  Changing the conversation from prior salary history to a discussion of an applicant’s target or expected salary can benefit an employer’s brand and help to recruit talent.[120]

Proponents of the use of salary history argue that salary history bans limit an employer’s ability to quickly and efficiently screen candidates.[121]  Prior salary information is seen as a fast, low-cost method of assessing an applicant’s candidacy for a job, evaluating whether the employer can afford the applicant and identifying a starting point for salary negotiations.[122]  This initial screen, however, can be achieved through other means that do not have the discriminatory impact of prior salary inquiries.  Employers can avoid spending time on candidates outside of their target ranges by providing candidates with a salary range or pay band expectations at the outset of the application process.[123]  This can help to set the expectations of both the applicant and the employer, leading those applicants seeking higher salaries to pursue other opportunities while also ensuring employers do not rely on the market forces theory, dropping compensation below the internally anticipated range simply because an applicant’s prior salary is lower.

V.     Conclusion

While signing the EPA, President Kennedy observed that “much remains to be done to achieve full equality of economic opportunity.”[124]  Over fifty years later, this statement continues to ring true today.[125]  The fourth exception delineated in the EPA, permitting wage differentials between sexes so long as the disparity is based on a “factor other than sex,” remains an area where further change is required.

Currently, federal circuits are deeply split on the issue of whether the use of an employee’s salary history is a permissible basis for a wage disparity under the EPA’s catch-all exception.[126]  Although it briefly appeared as though the Supreme Court would resolve the uncertainty surrounding this exception, the Court’s decision in Yovino v. Rizo failed to settle the issue.[127]  As a result, employers are faced with vastly different judicial interpretations of the exception in addition to an increasingly complex landscape of local and state laws on the issue.[128]

The approach first articulated by Judge Reinhardt in his 2018 decision, and later affirmed by the Ninth Circuit’s 2020 en bancdecision in Rizo v. Yovino, provides the most effective interpretation—prohibiting the use of prior salary from consideration as either the sole factor or one of multiple criteria.  Eliminating the use of salary history information helps to disrupt the cycle of wage discrimination suffered by minority employees and can provide both economic and non-monetary benefits to employers.  As the late Judge Reinhardt noted, “Allowing prior salary to justify a wage differential perpetuates this message, entrenching in salary systems an obvious means of discrimination—the very discrimination that the Act was designed to prohibit and rectify.”[129]


* J.D. Candidate 2021, Wake Forest University School of Law; International Politics, B.S. 2016, Georgetown University.  Thank you to the Board and Staff of the Wake Forest Law Review for their time and effort on this Comment.  I would also like to thank my mother, Susan Foster, for reading countless drafts of this Comment and listening to endless discussions on pay parity.

      [1].   Beth Pearsall, 50 Years After the Equal Pay Act, Parity Eludes Us, Am. Ass’n Univ. Women (Mar. 18, 2013), https://ww3.aauw.org/article/50-years-after-the-equal-pay-act-parity-eludes-us/.

      [2].   109 Cong. Rec. 9213 (1963) (statement of Rep. Matsunaga).

      [3].   Abby Lane & Katharine Gallagher Robbins, The Wage Gap Over Time, Nat’l Women’s L. Ctr. (May 3, 2012), https://nwlc.org/blog/wage-gap-over-time/.

      [4].   See Robin Bleiweis, Quick Facts About the Gender Wage Gap, Ctr. Am. Progress (Mar. 24, 2020), https://www.americanprogress.org/issues/women/reports/2020/03/24/482141/quick-facts-gender-wage-gap/ (calculating the gender wage gap using 2018 data from U.S. Census Bureau); see also Kevin Miller & Deborah J. Vagins, The Simple Truth about the Gender Pay Gap5, 7 (2018), https://www.aauw.org/app/uploads/2020/02/AAUW-2018-SimpleTruth-nsa.pdf.

      [5].   See Miller & Vagins, supra note 4, at 21.

      [6].   Equal Pay Act of 1963, 29 U.S.C. § 206(d)(1)(iv).

      [7].   Rizo v. Yovino, 887 F.3d 453, 469 (9th Cir. 2018) (McKeown, J., concurring); see also Miller & Vagins, supra note 4, at 21.

      [8].   887 F.3d 453 (9th Cir. 2018).

      [9].   Wernsing v. Dep’t of Hum. Servs., Ill., 427 F.3d 466, 468 (7th Cir. 2005).

     [10].   Taylor v. White, 321 F.3d 710, 720 (8th Cir. 2004); see also Drum v. Leeson Elec. Corp., 565 F.3d 1071, 1073 (8th Cir. 2009) (applying Taylor).

     [11].   Riser v. QEP Energy, 776 F.3d 1191, 1199 (10th Cir. 2015); Angove v. Williams-Sonoma, Inc., 70 F. App’x 500, 508 (10th Cir. 2003); Irby v. Bittick, 44 F.3d 949, 955 (11th Cir. 1995).

     [12].   Rizo, 887 F.3d at 460–61.

     [13].   Yovino v. Rizo, 139 S. Ct. 706, 710 (2019).  In its per curiam decision, the Court addressed the issue of whether a judge who died prior to the issuance of the opinion can be counted as a member of the majority, failing to resolve the uncertainty surrounding the EPA exception.  Id. at 707–08.

     [14].   Joanne Sammer, Employers Adjust to Salary-History Bans, SHRM (June 5, 2019), https://www.shrm.org/resourcesandtools/hr-topics/compensation/pages/employers-adjust-to-salary-history-bans.aspx; see also 9th Circuit: Employers May Not Use Pay History as Defense to Equal Pay Act Claims, McGuireWoods (Apr. 12, 2018), https://www.mcguirewoods.com/client-resources/Alerts/2018/4/9th-Circuit-Employers-Pay-History-Defense-Equal-Pay-Act-Claims.

     [15].   Equal Pay Act of 1963, Nat’l Park Serv., https://www.nps.gov/articles/equal-pay-act.htm (last updated Apr. 1, 2016).  The number of women in the civilian workforce grew rapidly during this time, increasing from roughly 24 percent at the beginning of the twentieth century to 37 percent by 1945.  See id.  An early push for equal compensation came from union leaders as they attempted to ensure that men’s wages after the war would not be undercut by the “cheaper” women’s labor.  See id.

     [16].   See id.

     [17].   See id.

     [18].   Lane & Robbins, supra note 3.

     [19].   Pearsall, supra note 1.  Additionally, in his 1956 State of the Union Address, President Dwight D. Eisenhower urged Congress to move forward with such legislation, remarking: “Legislation to apply the principle of equal pay for equal work without discrimination because of sex is a matter of simple justice.”  Annual Message to the Congress on the State of the Union. Jan 5, 1956, Eisenhower Libr. (Jan. 5, 1956), https://www.eisenhowerlibrary.gov/sites/default/files/file/1956_state_of_the_union.pdf.

     [20].   Equal Pay Act of 1963, supra note 15.

     [21].   In 2018, women’s earnings constituted 82 percent of men’s earnings.  Bleiweis, supra note 4.

     [22].   Id.  From 1960 to 2001 the rate of change was 0.38 percent per year; from 2001 to 2017 the rate was 0.26 percent per year.  Miller & Vagins, supra note 4, at 5.

     [23].   Miller & Vagins, supra note 4, at 5.

     [24].   Nat’l P’ship Women & Families, America’s Women and the Wage Gap1 (2020), https://www.nationalpartnership.org/our-work/resources/economic-justice/fair-pay/americas-women-and-the-wage-gap.pdf.

     [25].   Am. Ass’n Univ. Women, Quick Facts 1 (2019), https://www.aauw.org/app/uploads/2020/03/quick-facts-Equal-Pay-nsa.pdf.

     [26].   In 2018, the Ninth Circuit criticized the current status of the promise of equal pay, noting that “[a]lthough 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.”  Rizo v. Yovino, 887 F.3d 453, 456 (9th Cir. 2018), vacated, 139 S. Ct. 706 (2019).

     [27].   417 U.S. 188 (1974).

     [28].   Id. at 195.

     [29].   S. Rep. No. 88-176, at 1 (1963).

     [30].   Id.

     [31].   Corning Glass Works, 417 U.S. at 205, 208 (“To permit the company to escape [the] obligation [of paying male and female workers equally for the same work] by agreeing to allow some women to work on the night shift at a higher rate of pay as vacancies occurred would frustrate, not serve, Congress’s ends.”).

     [32].   Id. at 208.

     [33].   Equal Pay Act, 29 U.S.C. § 206(d)(1).

     [34].   Id.

     [35].   Corning Glass Works, 417 U.S. at 195 (citing Equal Pay Act of 1963, 29 U.S.C. § 206(d)(1)).  Although the EPA has similar objectives to Title VII in prohibiting discrimination in employment, the two statutes have distinct proof structures.  In contrast to Title VII’s McDonnell Douglas burden-shifting framework, the EPA “creates a type of strict liability” for those employers who pay sexes differently for the same work.  Compare McDonnell Douglas Corp. v. Green, 411 U.S. 792, 802 (1973) (“The complainant in a Title VII trial must carry the initial burden under the statute of establishing a prima facie case of racial discrimination. . . . The burden then must shift to the employer to articulate some legitimate, nondiscriminatory reason for the employee’s rejection.”), with Maxwell v. City of Tucson, 803 F.2d 444, 446 (9th Cir. 1986).  Unlike Title VII, a plaintiff who demonstrates a wage disparity is not required to prove discriminatory intent under the EPA.  See Maxwell, 803 F.2d at 446.

     [36].   Corning Glass Works, 417 U.S. at 196.  The statutory exceptions are affirmative defenses that must be both pled and proved by the employer.  Kouba v. Allstate Ins. Co., 691 F.2d 873, 875 (9th Cir. 1982); see also Corning Glass Works, 417 U.S. at 196–97.

     [37].   Corning Glass Works, 417 U.S. at 195 (referring to the EPA’s “basic structure and operation” as “straightforward”).

     [38].   See Wernsing v. Dep’t of Hum. Servs., Ill., 427 F.3d 466, 468 (7th Cir. 2005).

     [39].   Id. at 468.  In defense of its broad interpretation, the Seventh Circuit criticizes other circuits that have adopted a narrower construction and argues that those circuits have violated the text and explicit exceptions of EPA.  See id. at 470.

     [40].   See id.; see also Dey v. Colt Constr. & Dev. Co., 28 F.3d 1446, 1462 (7th Cir. 1994) (citing Fallon v. Illinois, 882 F.2d 1206, 1211 (7th Cir. 1989)) (“We explained in Fallon that the EPA’s fourth affirmative defense ‘is a broad “catch-all” exception [that] embraces an almost limitless number of factors, so long as they do not involve sex.’”); Covington v. S. Ill. Univ., 816 F.2d 317, 322 (7th Cir. 1987).

     [41].   See Taylor v. White, 321 F.3d 710, 717–20 (8th Cir. 2003).

     [42].   See id. at 718 (“While we recognize that salary retention policies might lead to wage decisions based on factors unrelated to an individual’s qualifications for a particular job, such policies are not necessarily gender biased.”).

     [43].   See id.

     [44].   Drum v. Leeson Elec. Corp., 565 F.3d 1071, 1073 (8th Cir. 2009); see also Corning Glass Works v. Brennan, 417 U.S. 188, 205 (1974) (rejecting employer’s “market forces” argument that the gender-based wage differential arose due to a job market that allowed women to be paid less than men for the same work).

     [45].   See Riser v. QEP Energy, 776 F.3d 1191, 1199 (10th Cir. 2015); Angove v. Williams-Sonoma, Inc., 70 F. App’x 500, 508 (10th Cir. 2003); Irby v. Bittick, 44 F.3d 949, 955 (11th Cir. 1995).

     [46].   See Riser, 776 F.3d at 1199; Angove, 70 F. App’x at 508.  In Riser v. QEP Energy, the Tenth Circuit reiterated existing circuit precedent holding that “the EPA ‘precludes an employer from relying solely upon a prior salary to justify pay disparity.’”  776 F.3d at 1199 (quoting Angove, 70 F. App’x at 508).

     [47].   See Riser, 776 F.3d at 1199.  Similarly, the Eleventh Circuit has also rejected employers’ sole reliance on prior salary as a valid “factor other than sex” exception to the EPA’s pay equity mandate, but has permitted “mixed-motive” salary determinations.  See Irby, 44 F.3d at 955.  In Irby v. Bittick, the Eleventh Circuit held that “[w]hile an employer may not . . . rest[] on prior pay alone, . . . there is no prohibition on utilizing prior pay as part of a mixed-motive, such as prior pay and more experience.”  Id.

     [48].   See Rizo v. Yovino, 887 F.3d 453, 456 (9th Cir. 2018) (“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.”), vacated, 139 S. Ct. 706 (2019); see also id. at 468 (“Because Kouba, however construed, is inconsistent with the rule that we have announced in this opinion, it must be overruled.”).

     [49].   Yovino v. Rizo, 139 S. Ct. 706, 710 (2019).

     [50].   Id. at 707 (“The petition in this case presents the following question: May a federal court count the vote of a judge who dies before the decision is issued?”).

     [51].   See Rizo v. Yovino, 950 F.3d 1217, 1231 (9th Cir. 2020) (“[I]f called upon to defend against a prima facie showing of sex-based wage discrimination, the employer must demonstrate that any wage differential was in fact justified by job-related factors other than sex.  Prior pay, alone or in combination with other factors, cannot serve as a defense.”).

     [52].   See Rizo v. Yovino, No. 14-cv-0423, 2015 WL 13236875, at *1 (E.D. Cal. Dec. 4, 2015).

     [53].   See id.

     [54].   See id. at *3.

     [55].   See id. at *2–3.

     [56].   See id. at *4.

     [57].   See id. at *6.

     [58].   See id.

     [59].   See id.

     [60].   See id. at *7.

     [61].   See id. (“The Ninth Circuit inKouba was not called upon to, and did not, rule on the question of whether a salary differential based solely on prior earnings would violate the EPA, even if motivated by legitimate, non-discriminatory business reasons.”).

     [62].   691 F.2d 873 (9th Cir. 1982).

     [63].   Id. at 878.

     [64].   See Rizo, 2015 WL 13236975, at *6–7.

     [65].   See id. at *8–9 (“[N]othwithstanding its non-discriminatory purpose, SOP [Standard Operating Procedure] 1440 necessarily and unavoidably conflicts with the EPA.”).

     [66].   See Rizo v. Yovino, 854 F.3d 1161, 1165 (9th Cir. 2017).

     [67].   See id. at 1163.  The panel emphasized that the Circuit continued to adhere to the interpretation articulated in Kouba: That the EPA does not impose a per se prohibition on the use of prior salary, and, further, the use of prior salary as the sole factor of consideration does not change this reasoning.  See id. at 1166 (“We do not agree with the district court that Kouba left open the question of whether a salary differential based solely on prior earnings violates the Equal Pay Act. To the contrary, that was exactly the question presented and answered in Kouba.”).

     [68].   See Rizo v. Yovino, 887 F.3d 453, 459 (9th Cir. 2018).

     [69].   See id. at 456; id. at 469 (McKeown, J., concurring); id. at 477 (Callahan, J., concurring); id. at 478 (Watford, J., concurring).

     [70].   See id. at 460 (“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. . . . 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.”); id. at 469 (McKeown, J., concurring) (“In my view, prior salary alone is not a defense to unequal pay for equal work. . . .  However, employers do not necessarily violate the Equal Pay Act when they consider prior salary among other factors when setting initial wages.”); id. at 477 (Callahan, J., concurring) (“[N]either Congress’s intent, nor the language of the Equal Pay Act, nor logic, requires, or justifies, the conclusion that a pay system that includes prior pay as one of several ingredients can never be a ‘factor other than sex . . .’”); id. at 478 (Watford, J., concurring) (“[P]ast pay can constitute a ‘factor other than sex,’ but only if an employee’s past pay is not itself a reflection of sex discrimination.”).

     [71].   Id. at 456.  “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.”  Id. at 456–57.

     [72].   Id. at 468.  “Reliance on past wages simply perpetuates the past pervasive discrimination that the Equal Pay Act seeks to eradicate. Therefore, . . . past salary may not be used as a factor in initial wage setting, alone or in conjunction with less invidious factors.”  Id.

     [73].   Yovino v. Rizo, 139 S. Ct. 706, 710 (2019).

     [74].   See Christopher Wilkinson & Alex Guerra, Business Groups Urge U.S. Supreme Court to Review Ninth Circuit Decision Rejecting Use of Prior Salary to Set Pay, Orrick: Equal Pay Pulse (Oct. 12, 2018), https://blogs.orrick.com/equalpaypulse/2018/10/12/business-groups-urge-u-s-supreme-court-to-review-ninth-circuit-decision-rejecting-use-of-prior-salary-to-set-pay/.

     [75].   Yovino, 139 S. Ct. at 707.

     [76].   Id. at 707–10.  The Court noted that the Ninth Circuit’s use of Judge Reinhardt’s vote “effectively allowed a deceased judge to exercise the judicial power of the United States after his death” while “federal judges are appointed for life, not for eternity.”  Id. at 710.

     [77].   Rizo v. Yovino, 950 F.3d 1217, 1221 (9th Cir. 2020).

     [78].   Equal Pay Act of 1963, 29 U.S.C. § 206(d)(1) (emphasis added); see also Rizo, 950 F.3d at 1224 (“The fourth exception is often shortened to ‘any factor other than sex,’ but here we are called upon to define its precise contours and we examine every word: ‘any other factor other than sex.’”) (internal citations omitted) (emphasis in original).

     [79].   Rizo, 950 F.3d at 1224 (“Because the three enumerated exceptions are all job-related, and the elements of the ‘equal work’ principle are job-related, Congress’ use of the phrase ‘any other factor than sex’ . . . signals that the fourth exception is also limited to job-related factors.”).

     [80].   Id. at 1224–25.  Noscitur a sociis advises courts to interpret words that are grouped together as carrying similar meanings.  See Yates v. United States, 574 U.S. 528, 543 (2015) (citing Gustafson v. Alloyd Co., 513 U.S. 561, 575 (1995)) (“[W]e rely on the principle of noscitur a sociis—a word is known by the company it keeps—to ‘avoid ascribing to one word a meaning so broad that it is inconsistent with its accompanying words, thus giving unintended breadth to the Acts of Congress.’”).  When applied to the ambiguous “factor other than sex” exception, this canon requires the general exception to be interpreted similarly to the specific job-related exceptions of seniority, merit, and productivity delineated by the EPA.  Rizo, 950 F.3d at 1224 (“Because the enumerated exceptions are job-related, the more general exception that follows them refers to job-related factors too.”).  Similarly, ejusdem generis requires general words at the end of a list to be understood as related and similar to the preceding, specific words.  See Norfolk & W. Ry. Co. v. Am. Train DispatchersAss’n, 499 U.S. 117, 129 (1991) (“Under the principle of ejusdem generis, where a general term follows a specific one, the general term should be understood as a reference to subjects akin to the one with specific enumeration.”).  Through this lens, the catch-all exception “any other factor than sex” must be limited to job-related reasons. Rizo, 950 F.3dat 1225 (“Because all of the enumerated exceptions are job-related, the general exception that follows—’any factor other than sex’—is limited to job-related factors.”).

     [81].   Corning Glass Works v. Brennan, 417 U.S. 190, 195 (1963); see also S. Rep. No. 88-176, at 1 (1963).

     [82].   Rizo, 950 F.3d at 1228 (“But prior pay itself is not a factor related to the work an employee is currently performing, nor is it probative of whether sex played any role in establishing any employee’s pay.”).

     [83].   See id. at 1229 (“[W]e conclude that the wage associated with an employee’s prior job does not qualify as a factor other than sex that can defeat a prima facie EPA claim.”).  See also Rizo v. Yovino, 887 F.3d 453, 468 (9th Cir. 2018) (“Reliance on past wages simply perpetuates the past pervasive discrimination that the Equal Pay Act seeks to eradicate.  Therefore, we readily reach the conclusion that past salary may not be used as a factor in initial wage setting, alone or in conjunction with less invidious factors.”) vacated, 139 S. Ct. 706 (2019).

     [84].   See Rizo, 950 F.3d at 1232 (McKeown, J., concurring) (“But the majority goes too far in holding that any consideration of prior pay is ‘inconsistent’ with the Equal Pay Act, even when it is assessed alongside other job-related factors . . .”); id. at 1242 (Callahan, J., concurring) (“Nonetheless, the majority goes beyond what is necessary to resolve this appeal and mistakenly proclaims that prior salary can never be considered as coming within the fourth exception to the Equal Pay Act.”).  Judges McKeown and Callahan also authored concurrences to the 2018 en banc decision authored by Judge Reinhardt, similarly criticizing the bright-line rule barring employers from ever considering prior pay.  See Rizo, 887 F.3d at 469 (McKeown, J., concurring) (“[T]he majority goes too far in holding that any consideration of prior pay is ‘impermissible’ under the Equal Pay Act.”); id. at 472–73 (Callahan, J., concurring) (“I write separately because in holding that prior salary can never be considered the majority fails to follow Supreme Court precedent.”).  Judge Watford authored a separate concurrence in 2018 but joined the majority in 2020.  See id. at 478.  But see Rizo, 950 F.3d at 1219.

     [85].   Salary History Bans, Alliance 2020, https://www.alliance2020.com/resources/salary-history-bans/ (last visited Feb. 20, 2021).  As of February 2021, eighteen states and fifteen localities have legislation banning the use of salary history.  See id.

     [86].   Arthur H. Mazor et al., Equal Pay Legislation Banning Salary History Questions 1 (2018), https://www2.deloitte.com/content/dam/Deloitte/us/Documents/human-capital/us-equal-pay-legislation-banning-salary-history-questions.pdf.

     [87].   Susan Milligan, Salary History Bans Could Reshape Pay Negotiations, SHRM (Feb. 16, 2018), https://www.shrm.org/hr-today/news/hr-magazine/0318/pages/salary-history-bans-could-reshape-pay-negotiations.aspx (describing salary history questions as “asked and answered almost reflexively during initial hiring discussions”).

     [88].   See id.

     [89].   See id.

     [90].   See John Feldman, Banning the Salary History Ban: The Pros and Cons for Employer and Applicant, Forbes (Aug. 21, 2018, 9:00 AM), https://www.forbes.com/sites/forbeshumanresourcescouncil/2018/08/21/banning-the-salary-history-ban-the-pros-and-cons-for-employer-and-applicant/#52061fc84fc0.  Through salary history an employer can alert a candidate to a potential wage incompatibility between the employer’s expected salary range and the applicant’s previous compensation levels early in the process, “increasing their interview-to-hire ratio and shortening their time to hire.”  Id.

     [91].   Milligan, supra note 87.

     [92].   For example, Amazon, Wells Fargo, American Express, Cisco, Google, and Bank of America have changed their recruiting policies, removing any questions regarding salary history.  Yuki Noguchi, More Employers Avoid Legal Minefield by Not Asking About Pay History, NPR (May 3, 2018, 5:34 PM), https://www.npr.org/2018/05/03/608126494/more-employers-avoid-legal-minefield-by-not-asking-about-pay-history.

     [93].   To illustrate this complexity, consider the structure of two household names.  In 2018, Apple had over 2.4 million employees in the United States across all fifty states, four times greater than the number of U.S. employees it had in 2010.  See, e.g., Apple’s US Jobs Footprint Grows to 2.4 Million, Apple: Newsroom (Aug. 15, 2019), https://www.apple.com/newsroom/2019/08/apples-us-job-footprint-grows-to-two-point-four-million/ (expanding workforce to include employees in all fifty states).  Projecting similar growth, Amazon announced the creation of 3,000 jobs for “remote workers” in March 2019.  Abigail Hess, Amazon is Hiring 3,000 Remote Workers in 18 States,CNBC (Mar. 11, 2019), https://www.cnbc.com/2019/03/11/amazon-is-hiring-3000-remote-workers-in-18-states.html.  The job listings for these customer service positions indicated the roles were distributed across eighteen states.  See id.  With these workforce expansions, both of these companies would now be subject to each of the varying interpretations of “factor other than sex.”  Considering the impact of the circuit split alone, without the effects of state and local laws, Apple and Amazon may set the salaries of new employees in Wisconsin, located in the Seventh Circuit, on the sole basis of prior salary. However, for employees one state away in Iowa, located in the Eighth Circuit, the companies would have to show the use of prior salary for employees did not improperly rely on the prohibited market forces theory.  The same companies could only rely on prior salary history for employees in New Mexico and Alabama, located in the Tenth and Eleventh Circuits respectively, if they also used other factors, such as experience and education, to justify the wage disparity.  Add to this confusion the restrictions of various state and local laws, and the landscape becomes bewildering.

     [94].   See Noguchi, supra note 92.  This is a sharp transformation from the long-standing practices of many employers, with some even going so far as to obtaining applicants’ W-2s to confirm previous salaries.  Milligan, supra note 87; see also John Feldman, What Should Employers Be Aware of When Requesting W-2 Forms from Job Applicants?, Forbes (June 6, 2017, 9:00 AM), https://www.forbes.com/sites/forbeshumanresourcescouncil/2017/06/06/what-should-employers-be-aware-of-when-requesting-w-2-forms-from-job-applicants/#4523a83064a8.

     [95].   Korn Ferry Executive Survey: New Laws Forbidding Questions on Salary History Likely Changes the Game for Most Employers, Korn Ferry (Nov. 14, 2017), https://www.kornferry.com/press/korn-ferry-executive-survey-new-laws-forbidding-questions-on-salary-history-likely-changes-the-game-for-most-employers (“choosing to comply with the most stringent legislation is the likely mode of adapting to the new legislation, as opposed to complying to each local legislation”).

     [96].   Milligan, supra note 87.

     [97].   Rizo v. Yovino, 950 F.3d 1217, 1231 (9th Cir. 2020).

     [98].   Nat’l Women’s L. Ctr., Asking for Salary History Perpetuates Pay Discrimination from Job to Job 1 (2018), https://nwlc.org/wp-content/uploads/2018/12/Asking-for-Salary-History-Perpetuates-Discrimination-1.pdf.  This cycle of discrimination is precisely what the EPA was designed to remedy.  The legislation was introduced in response to a report issued by President Kennedy’s Commission on the Status of Women recommending equal pay statutes for comparable work.  President’s Comm’n on the Status of Women,American Women 37 (1963); see also Audio tape: John F. Kennedy,Statement by the President on the Establishment of the President’s Commission on the Status of Women (Dec. 14, 1962) (transcript available in the John F. Kennedy Presidential Library and Museum) (“It is my hope that the Commission’s Report will indicate what remains to be done to demolish prejudices and outmoded customs which act as barriers to the full partnership of women in our democracy.”).

     [99].   Equal Pay Act of 1963, 29 U.S.C. § 206(d)(1).

   [100].   Lane & Robbins, supra note 3.

   [101].   See Mazor et al., supra note 86.

   [102].   Bob Corlett, Why Employers Need to Stop Asking for Salary History, Right Now, Staffing Advisors: Blog (Apr. 24, 2017), https://blog.staffingadvisors.com/why-employers-need-to-stop-asking-for-salary-history-right-now.

   [103].   Lydia Frank, Employers Should Stop Asking for Salary History, But Not for the Reason You Think, PayScale (June 27, 2017), https://www.payscale.com/compensation-today/2017/06/employers-should-stop-asking-salary-history-but-not-for-the-reason-you-think.

   [104].   Nat’l Women’s L. Ctr., supra note 98, at 2.

   [105].   Jon Heuvel, Should Salary History Questions be Outlawed?, Personnel Today (Sept. 3, 2019), https://www.personneltoday.com/hr/should-salary-histories-be-consigned-to-history/.

   [106].   The taboo associated with sharing salary information with colleagues and peers is eroding as millennials are more willing to discuss this information with their peers.  Joe Pinsker, The Extreme Discomfort of Sharing Salary Information, The Atl. (Oct. 16, 2018), https://www.theatlantic.com/family/archive/2018/10/talking-about-salaries-coworkers/573172/; see also Jessica Lutz, Millennials Are Slowly Killing Salary Secrecy—And That’s a Good Thing, Forbes (Nov. 30, 2017, 8:30 AM), https://www.forbes.com/sites/jessicalutz/2017/11/30/millennials-are-slowly-killing-salary-secrecy-and-thats-a-good-thing/#5d6792826015.  This culture of pay transparency is beneficial to employers because “when people don’t know how their pay compares to their peers they’re actually more likely to feel underpaid—and even discriminated against.”  David Burkus, Why You Should Know How Much Your Coworkers Get Paid, TED: Ideas (Apr. 4, 2017), https://ideas.ted.com/why-you-should-know-how-much-your-coworkers-get-paid/.  By providing employees with a transparent, reasoned understanding of “what fair pay is for their position and skill set at their company” employers reduce the chance of an expensive lawsuit.  Glassdoor,Global Salary Transparency Survey, Employee Perceptions of Talking Pay 3 (2015), https://media.glassdoor.com/pr/press/pdf/GD_Survey_GlobalSalaryTransparency-FINAL.pdf.

   [107].   Burkus, supra note 106.

   [108].   See id.

   [109].   Heather Boushey & Sarah Jane Glynn, There Are Significant Business Costs to Replacing Employees, Ctr. for Am. Progress (Nov. 16, 2012, 3:44 AM), https://www.americanprogress.org/issues/economy/reports/2012/11/16/44464/there-are-significant-business-costs-to-replacing-employees/.

   [110].   Nat’l Women’s L. Ctr., supra note 98, at 3.

   [111].   Moshe A. Barach & John J. Horton, How Do Employers Use Compensation History:? Evidence from a Field Experiment 3 (CESifo Working Paper No. 6559, 2017), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3014719.

   [112].   See id.  In response to the lack of data regarding an applicant’s salary history, “employers responded to their information deficit primarily by acquiring more of their own information.”  Id.  Although more effort is required to thoroughly screen applicants without salary history information, by getting a sense of prior job attributes through questioning rather than the use of a salary proxy, employers cast a wider net and hired a broader pool of applicants than those that would have been hired based on prior salary alone.  See id.

   [113].   See Nat’l Women’s L. Ctr., supra note 98, at 3.

   [114].   See id. at 3.  Using salary history as an indicator for interest in a position can remove more experienced workers with higher salaries from consideration even if they are interested into pursuing positions with less responsibilities or lower time commitments.  Employers relying on the prior salaries of these applicants would deem them too expensive for the position and they would be screened out of the application process.  See id. at 1.

   [115].   See id. at 2.

   [116].   See Kerry Jones, The Most Desirable Employee Benefits, Harv. Bus. Rev. (Feb. 15, 2017), https://hbr.org/2017/02/the-most-desirable-employee-benefits.  Furthermore, the unprecedented impact of COVID-19 on the workplace has increased the desire for flexibility and remote working.  See Mary Baker, Future of Work Tops HR Priorities for 2020–21, Gartner (July 6, 2020), https://www.gartner.com/smarterwithgartner/future-of-work-tops-hr-priorities-for-2020-21/; Rainer Strack et al., People Priorities for the New Now, BCG (Apr. 30, 2020), https://www.bcg.com/publications/2020/seven-people-priorities-in-reponse-to-covid.

   [117].   Susan M. Heathfield, Pros and Cons of Asking for the Salary History of a Candidate, The Balance Careers, https://www.thebalancecareers.com/what-is-a-salary-history-1919067 (last updated Jan. 17, 2020).

   [118].   See supra note 106 and accompanying text.

   [119].   Liz Ryan, When Someone Demands Your Salary History, Give Your Salary Requirement Instead, Forbes (Jan. 16, 2017, 6:38AM), https://www.forbes.com/sites/lizryan/2017/01/16/when-they-demand-your-salary-history-give-your-salary-requirement-instead/#10296db5a8bb.

   [120].   See id.

   [121].   Heathfield, supra note 117.

   [122].   Id.

   [123].   Milligan, supra note 87.

   [124].   Audio tape: John F. Kennedy, supra note 98.

   [125].   See Lane & Robbins, supra note 3 and accompanying text.

   [126].   See supra Part III for a discussion of the circuit split on the interpretation of the EPA’s “factor other than sex” exception.

   [127].   Yovino v. Rizo, 139 S. Ct. 706, 710 (2019).

   [128].   See Milligan, supra note 87.

   [129].   Rizo v. Yovino, 887 F.3d 453, 468 (9th Cir. 2018).

visa, approved, journey, template, service, tour, paperwork, visit, ticket, tourism, trip, international, immigration, sign, national, contract, permission, foreign, certificate, passport, business, hand, office, banner, paper, form, apply, application, document, authorization, embassy, agreement, text, product, logo, font, design, brand, graphic design, graphics, communication, illustration

Makenzie Taylor

Each year, 66,000 H-2B visa guest workers enter the United States to perform nonagricultural temporary and seasonal jobs[1] in industries such as forestry, landscaping, hospitality, seafood processing, and construction.[2] The workers typically perform “relatively low-skilled” jobs and often work in “geographic areas where the number of available U.S. workers is limited.”[3] They comprise less than 0.001% of total U.S. employment.[4]

Far from reducing job availability for U.S. workers, the H-2B program is essential to many smaller and seasonal businesses.[5] It “supplies a source of supplementary labor for [physically demanding] jobs that U.S. workers are unwilling to take.”[6] H-2B workers provide a “legal, stable and motivated work force,” allowing businesses to grow and create more jobs for Americans as well.[7] U.S. workers, though cheaper to hire, are not always available, interested, or dependable.[8]

By contrast, employers have reported that H-2B employees are consistently reliable and hard-working, and their productivity helps offset the cost of recruiting and hiring them.[9] H-2B employment also correlates with higher U.S. employment rates.[10] Without the program, many employers would go unstaffed, close their doors, and cause “lost income for American businesses, and lost tax revenues” for the States.[11]

The Problem

Despite these benefits, the program’s cumbersome nature discourages employer participation: “[T]he system [is] complicated, time-consuming, costly and inefficient.”[12] Petitioning employers must prove “[t]here are not enough U.S. workers who are able, willing, qualified, and available to do the temporary work.”[13] They must make “extensive efforts to recruit U.S. workers,” file documentation with four different government agencies, and foot the bill for guest workers’ visas and transportation costs.[14]

Once the 66,000 annual cap is reached, the U.S. Citizenship and Immigration Services (USCIS) stops accepting petitions and will not issue additional visas until the next year.[15] This means that even after expending significant time and money into the petition process, many employers fail to secure their necessary workforce and are in a worse position than before they applied. Even one small mistake in the “complicated application process can mean delayed approval or visas denied—both extremely costly for employers.”[16] The uncertainty involved in the petition process incentivizes employers to petition for more H-2B workers than they actually need, “just in case their business takes off or some of their workers quit after the quota is hit.”[17] Employers who do so, and whose petitions are approved, further decrease the likelihood of other employers receiving their necessary visas.

Employers may use the premium processing track to “expedite the adjudication of certain forms,” but doing so costs an additional fee of $1,500 per petition.[18] Employers are also financially responsible for guest workers’ roundtrip transportation to and from their home countries, daily meals and lodging, and for each “visa, visa processing, and other related fees.”[19] Finally, businesses often require consultants and lawyers to navigate the process, adding to their costs.[20]

Each employer individually shoulders the full financial burden of this process, because H-2B workers may not “switch employers during their visa terms.”[21] In order for a guest worker to continue working for a second employer after her original visa term ends, the putative secondary employer must file and receive approval for a petition “requesting classification and an extension of the alien’s stay in the United States.”[22] H-2B workers are required to leave the States at the end of their authorized period of stay,[23] so if the secondary petition has not yet been granted, the worker must travel home before turning around and returning to the States for the second job. This unnecessarily duplicative process only adds to employer cost and restricts the employees’ access to stable employment.

The Solution

Visa portability, whereby an H-2B worker may transfer her employment from one authorized employer to another without an intermediate petition process, is the best solution to this problem.[24] Portability would encourage cost-spreading, allowing employers to share in recruitment, visa, and transportation expenses for shared workforces. For example, Colorado’s Steamboat ski resort hires H-2B employees as dishwashers for its winter season, from late November to April.[25] Lindy’s Seafood in Maryland hires H-2B workers as crab pickers from April through December.[26] Visa portability would allow Steamboat to send its H-2B workers to Lindy’s at the end of the ski season for the start of Lindy’s crab-processing season, as long as both companies proved a seasonal need for temporary workers and were approved by USCIS. Steamboat and Lindy’s could share the costs of the visa petition and travel expenses and provide workers with a longer term of employment. This would increase efficiency and make H-2B employment more affordable—benefitting both the workers and U.S. businesses.

The Department of Labor has already set the stage for this change by allowing for broader dissemination of job offer information.[27] It has instructed that job orders may be stored as electronic records in an electronic job registry, resulting in a “complete, real-time record of job opportunities for which H-2B workers are sought.”[28] H-2B employers could use a similar system to match approved employers with available employees who are already in the States.[29] Additionally, requiring H-2B workers to fulfill their contract with the petitioning employer before accepting a new job would assuage any employer fears of H-2B workers jumping to new employers upon arrival.[30]

Conclusion

The H-2B visa program is an essential supplement to the U.S. workforce and economy, enabling small- and mid-size businesses to successfully perform seasonal and temporary operations in essential industries. Far from taking jobs away from U.S. workers, H-2B employees comprise a small segment of the workforce and their employment correlates with higher U.S. worker employment. In order to increase the program’s feasibility for businesses and ease its burden on both employers and foreign workers, the best solution is a policy of visa portability. This solution would increase efficiency, reduce costs, and provide more stable employment for a crucial segment of the workforce.

[1] H-2B Temporary Non-Agricultural Workers, USCIS (May 29, 2020), https://www.uscis.gov/working-in-the-united-states/temporary-workers/h-2b-temporary-non-agricultural-workers.

[2] Kati L. Griffith, United States: U.S. Migrant Worker Law: The Interstices of Immigration Law and Labor and Employment Law, 31 Comp. Lab. L. & Pol’y J. 125, 135 (2009).

[3] Madeline Zavodny & Tamar Jacoby, The Economic Impact of H-2B Workers 4 (2010), https://www.uschamber.com/sites/default/files/documents/files/16102_LABR%2520H2BReport_LR.pdf.

[4] Id. at 23.

[5] Charles C. Mathes, Note, The Department of Labor’s Changing Policies Toward the H-2B Temporary Worker Program: Primarily for the Benefit of Nobody, 80 Fordham L. Rev. 1801, 1814 (2012).

[6] Id.

[7] Zavodny & Jacoby, supra note 3, at 10.

[8] See id. (explanation by a forestry contractor that he has “hired dozens and dozens of American workers. Only a handful have ever shown up for work. Of those, we have never had one last more than two days.”).

[9] Zavodny & Jacoby, supra note 3, at 10.

[10] Id. at 2.

[11] Mathes, supra note 5, at 1813. See also Suzanne Monyak, Trump to Suspend New Work Visas Through 2020, Law360 (June 22, 2020, 3:37 PM), https://www.law360.com/articles/1285526/trump-to-suspend-new-work-visas-through-2020 (reporting that in June 2020, President Trump restricted visas to “free up 525,000 jobs for Americans,” but he exempted food supply and seafood industry H-2B workers, evidencing the U.S. economy’s need for these workers and demonstrating that they do not compete with U.S. workers for jobs).

[12] Zavodny & Jacoby, supra note 3, at 20.

[13] Forms: H-2A, H-2B, and H-3 Visa, USCIS (Dec. 1, 2020), https://www.uscis.gov/forms/explore-my-options/h-2a-h-2b-and-h-3-visa.

[14] Zavodny & Jacoby, supra note 3, at 2.

[15] Zavodny & Jacoby, supra note 3, at 6.

[16] Id. at 20.

[17] Id. at 21.

[18] Premium Processing Fee Increase Effective Oct. 19, 2020, USCIS (Oct. 16, 2020), https://www.uscis.gov/news/premium-processing-fee-increase-effective-oct-19-2020.

[19] Fact Sheet #78F: Inbound and Outbound Transportation Expenses, and Visa and Other Related Fees under the H-2B Program, U.S. Dep’t of Labor, Wage and Hour Div. (2015), https://www.dol.gov/sites/dolgov/files/WHD/legacy/files/whdfs78f.pdf.

[20] Zavodny & Jacoby, supra note 3, at 21. See also Griffith, supra note 2, at 136 (revealing the admission of some employers that “they opt out of the H-2 program entirely and hire undocumented workers because the ‘process is too expensive, taxing, and time-consuming’”).

[21] Griffith, supra note 2, at 135.

[22] 8 C.F.R. § 214.2 (h)(2)(i)(D) (2020).

[23] Fact Sheet #69: Requirements to Participate in the H-2B Program, U.S. Dep’t of Labor, Wage and Hour Div. (2009), https://www.dol.gov/sites/dolgov/files/WHD/legacy/files/whdfs69.pdf.

[24] See Mathes, supra note 5, at 1812–13 (explaining that legislation was introduced in 2005 that allowed “temporary guestworkers to change employers without penalty,” but the bill was never voted on).

[25] Employment FAQ, Steamboat Ski & Resort Corp, https://www.steamboat.com/employment/faq (last visited Jan. 6, 2021).

[26] Job Opportunities, Lindy’s Seafood, Inc., https://www.lindysseafood.com/job-opportunities (last visited Jan. 6, 2021).

[27] Temporary Non-Agricultural Employment of H-2B Aliens in the United States, 77 Fed. Reg. 10038, 10128 (Feb. 21, 2012).

[28] Id.

[29] Mathes, supra note 5, at 1850.

[30] Id.

By Alex Lewis

            Working remotely has become the new normal, and it may stay that way after COVID-19.[1] Although many professionals enjoy the safety, freedom, and flexibility that comes with remote work, a potential tax nightmare may be around the corner for some in 2021. If employees did not switch over their withholding once they started working remotely in a different state, those individuals could incur a higher tax bill in their resident state and possibly incur penalties.[2] Additionally, companies that now have employees working in states other than the business’s home office may unintentionally trigger income or sales tax nexus in their employees’ home states.[3] These employers may also be required to pay unemployment insurance tax in those states that employees now call home.[4] Although some state legislatures have released guidance for determining nexus and apportionment of income due to remote workers, many states have yet to address the issue.[5] Out of all the uncertainty caused by COVID-19, one thing is clear—preparing and paying income, payroll, and unemployment tax for both individuals and corporations could be complicated and expensive.

Individual Income Tax Implications 

            Typically, the state in which a taxpayer resides taxes all of their income, regardless of where it is earned.[6] Additionally, when a taxpayer works in more than one state during a year, the individual must, in most states, allocate their income to the respective state in which it was earned.[7] When this happens, the taxpayer’s resident state will give a tax credit to the taxpayer for the state income taxes paid to another state.[8]

            When employees began working remotely due to COVID-19, the taxpayer may now have less income to allocate to the state in which they normally worked (if it is located in another state).[9] Since less income will be allocated to the state in which they normally work, the amount of taxes due and the amount of credit that the taxpayer will be able to claim on their resident state income tax return will be lower.[10] The smaller credit could cause the taxpayer to have a much higher income tax liability in their resident state, which could result in tax penalties for failing to make estimated payments in their resident state.[11]

            Although some states have exempted income earned in the state because of COVID-19,[12] others have not.[13] Thus, employees should check with their employer and change their withholding requirements to their resident state to ensure that they do not incur tax penalties as a result of working remotely.[14]

Business Income/Payroll/Unemployment Tax Implications 

            Businesses that allowed their employees to work remotely due to the COVID-19 pandemic may face far more challenges. There are a variety of ways that states require businesses to apportion income.[15] Most states require businesses only to apportion income based on the sales made within the state.[16] Those states will likely be unaffected by the COVID-19 remote workforce. However, other states apportion income with a multi-factor model, which allocates income based on sales, property, and payroll.[17]

            The remote workforce will change these calculations because remote employees will change the amount of payroll allocated to each state. Some states have released guidance exempting income earned by employees in the state that were relocated due to COVID-19.[18] Under these exemptions, income earned by remote workers due to COVID-19 will not be included in the apportionment calculation.[19] Other states only allow an employer to exempt payroll from the apportionment calculation during periods when a government shelter-in-place mandate was in effect.[20] Thus, a business may need to determine the specific dates employees worked remotely and cross-check those dates with shelter-in-place mandate dates to calculate the payroll factor appropriately. In rare situations, a company may trigger nexus in a state, and an additional filing requirement, simply because they had a remote worker in the state, even though the business did not have any sales or property in the state.            

            States that do not have traditional corporate income tax regimes could cause further issues for companies. In extreme circumstances, companies may be required to register and pay certain income and other taxes.[21] For example, in Texas, a non-Texas entity does not have to pay their corporate franchise tax unless it (1) has over $500,000 of gross receipts from doing business in Texas; (2) obtains a use tax permit; or (3) has physical presence in the state.[22] Establishing physical presence includes having employees or representatives doing business in the state.[23] So, if a company normally does not have over $500,000 in gross receipts in Texas, but now has an employee working remotely in the state due to COVID-19, the entity must now pay Texas franchise tax. Washington’s business and occupation tax (“B&O”) has similar tax characteristics.[24] In Washington, a business must pay B&O tax if it (1) has physical presence nexus in Washington; (2) has more than $100,000 in combined gross receipts sourced to Washington; or (3) is organized or commercially domiciled in Washington. Thus, a remote worker could trigger nexus for a company even if they do not normally meet the $100,000 threshold.[25]

            Finally, companies that now have employees working remotely could cause the employer to pay unemployment insurance tax in the state in which the employee relocated.[26] Some states require an employer to file with the state and begin paying unemployment insurance tax once an employer has one employee working in the state.[27] In some circumstances, an employee may be exempt from triggering unemployment insurance taxes.[28]

Conclusion

            With so many changes happening for employers and workers, many taxpayers may not yet be worried about their next tax bill in 2021—but maybe they should be. Making sure that employers are withholding income to the correct state could alleviate future tax issues. Also, for businesses that are merely trying to stay afloat during the pandemic, the potential additional filing requirements will be an unwelcome surprise next year. Although some states have offered guidance on how to allocate payroll to the state, the nonuniformity in tax laws across states creates a hassle and could lead to a higher tax bill (or, at least, a higher tax preparation bill). States still have time to issue helpful guidance to employers regarding their payroll allocation. If corporations are lucky, some states may entirely waive the physical presence threshold that would otherwise trigger a filing requirement. Conversely, since most states are facing severe budget deficits, they may be less forgiving and will not waive any remote work performed by employees.[29] If more states follow Georgia’s guidance, employers will undoubtedly incur additional headaches trying to cross-check governmental shelter-in-place mandates with specific dates that employees worked remotely.[30] Nevertheless, with some employers now embracing remote work as a permanent solution, Americans may feel the pandemic’s tax effects for years come.[31]

[1] Why Remote Working Will Be the New Normal, Even After COVID-19, EY (Sept. 7, 2020), https://www.ey.com/en_be/covid-19/why-remote-working-will-be-the-new-normal-even-after-covid-19.

[2] Katherine Loughead, In Some States, 2020 Estimated Tax Payments Are Due Before 2019 Tax Returns, Tax Found. (May 22, 2020), https://taxfoundation.org/2020-quarterly-estimated-tax-payments-2019-tax-returns/.

[3] Daniel N. Kidney, State and Local Tax Implications of Remote Employees During the COVID-19 Pandemic, Wipfli (June 19, 2020), https://www.wipfli.com/insights/articles/tax-covid-19-remote-employee-nexus (stating that nexus is typically created by having “physical presence” in the state).

[4] Larry Brant, Having Employees Working Remotely May Become the New Norm—There May Be Tax and Other Traps Lurking Out There for Unwary Employers, Foster Garvey (May 26, 2020), https://www.foster.com/larry-s-tax-law/tax-traps-remote-employees-covid19.

[5] Coronavirus Tax Relief FAQs, Ga. Dep’t of Revenue, https://dor.georgia.gov/coronavirus-tax-relief-faqs (last visited Sept. 16, 2020).

[6] See Idaho Code § 63-3011; see also Credit for Taxes Paid to Another State, Va. Tax, https://www.tax.virginia.gov/credit-for-taxes-paid-to-another-state (last visited Sept. 16, 2020).

[7] See Mont. Admin. R. 42.15.110(3) (requiring an employee to only allocate income that is “sourced” to the respective state); see also Or. Dep’t of Revenue, Publication OR-17 Individual Income Tax Guide 47 (2019), https://www.oregon.gov/dor/forms/FormsPubs/publication-or-17_101-431_2019.pdf (requiring an employee to apportion income by taking the number of days worked in the respective state divided it by the total number of days worked everywhere in a year).

[8] Idaho Code § 63-3029(1).

[9] See Or. Dep’t of Revenue, supra note 7, at 47.

[10] Idaho Code § 63-3029(3)(a)(i).

[11] See Loughead, supra note 2 (stating that Delaware, Indiana, Montana, Nebraska, New Jersey, New York, Oklahoma, and Rhode Island require estimated state income tax payments).

[12] FAQ Articles, N.D. Tax, https://www.nd.gov/tax/faqs/articles/412-/ (last visited Sept. 16, 2020).

[13] Guidance for Individuals Temporarily Living and Working Remotely in Vermont, Vt. Dep’t of Taxes, https://tax.vermont.gov/coronavirus#temporarily (last visited Sept. 16, 2020).

[14] For example, assume an individual taxpayer normally lives in New York, but works in Massachusetts and has a taxable income of $100,000. In a normal year, the taxpayer will pay $5,050 (calculated using the 5.05 percent Massachusetts individual income tax rate) in tax to Massachusetts. Thus, the taxpayer will be able to claim a $5,050 credit for taxes paid to another state on their New York return, reducing the amount of taxes owed to New York. Now, assume that because of a stay-at-home order, the taxpayer works at home for 75 percent of the year, and only 25 percent of its income will be allocated to Massachusetts. Then, the taxpayer will only receive a $1,262.5 credit on their New York tax return, causing the taxpayer to underpay their taxes substantially unless a withholding change is made. If no change is made, the taxpayer may incur penalties. See 2019 Personal Income Tax Rates, Mass. Dep’t of Revenue, https://www.mass.gov/info-details/major-2019-tax-changes#2019-personal-income-tax-rates- (last visited Sept. 16, 2020) (providing Massachusetts state income tax rates); Who Must Make Estimated Tax Payments?, N.Y. State Dep’t of Tax’n & Fin. (Aug. 5, 2020), https://www.tax.ny.gov/pit/estimated_tax/who_must_make.htm.

[15] State Apportionment of Corporate Income, Fed’n of Tax Adm’rs (Feb. 2020), https://www.taxadmin.org/assets/docs/Research/Rates/apport.pdf.

[16] Id.

[17] Id.

[18] See Frequently Asked Questions About the Income Tax Changes Due to the COVID-19 National Emergency, Neb. Dep’t of Revenue, https://revenue.nebraska.gov/businesses/frequently-asked-questions-about-income-tax-changes-due-covid-19-national-emergency (last visited Sept. 16, 2020).

[19] See id.

[20] See Coronavirus, supra note 5.

[21] Texas: Franchise Tax, Economic Nexus Rule is Finalized, KPMG (Dec. 20, 2019), https://assets.kpmg/content/dam/kpmg/us/pdf/2019/12/19611.pdf

[22] 34 Tex. Admin. Code § 3.586(f).

[23] Id. § 3.586(d)(5).

[24] Out of State Business Reporting Thresholds and Nexus, Wash. State Dep’t of Revenue (Apr. 2020), https://dor.wa.gov/education/industry-guides/out-state-businesses#:~:text=1%2C%202020%2C%20a%20business%20must,sourced%20or%20attributed%20to%20Washington (last visited Sept. 16, 2020).

[25] Wash. Admin. Code § 458-20-193(102)(a)(ii) (stating that even the “slightest presence” of a single employee may trigger the physical presence nexus).

[26] Stephen Miller, Out-of-State Remote Work Creates Tax Headaches for Employers, SHRM (June 16, 2020), https://www.shrm.org/resourcesandtools/hr-topics/compensation/pages/out-of-state-remote-work-creates-tax-headaches.aspx.

[27] Out-of-State Employers with Employees Living in Idaho, Idaho State & Fed. Res. for Bus. (July 30, 2020), https://business.idaho.gov/out-of-state-employers-with-employees-living-in-idaho/.

[28] Occupations Exempted from Unemployment Insurance Coverage, Wash. State Emp. Sec. Dep’t https://esdorchardstorage.blob.core.windows.net/esdwa/Default/ESDWAGOV/employer-Taxes/ESD-exempt-professions-chart.pdf (last visited Sept. 16, 2020).

[29] States Grappling with Hit to Tax Collections, Ctr. on Budget and Pol’y Priorities (Aug. 24, 2020), https://www.cbpp.org/sites/default/files/atoms/files/4-2-20sfp.pdf.

[30] See Coronavirus, supra note 5.

[31] Why Remote, supra note 1.

By Katy Thompson and Lanie Summerlin

          In Equal Employment Opportunity Commission v. McLeod Health Inc., Cecilia Whitten (“Whitten”) was employed by McLeod Health, Inc. (“McLeod”) for twenty-eight years as the editor of McLeod’s internal employee newsletter[1].  Whitten was born with postaxial hypoplasia of the lower extremity, so she lacks certain bones in her feet, legs, and right hand. Therefore, Whitten has limited mobility and has always struggled with falling.[2]  In 2012, Whitten fell three times: twice outside of work and once at work.  As a result, McLeod required Whitten to undergo several fitness-for-duty exams.[3]  McLeod concluded that Whitten was a high-fall risk.  Whitten proposed several reasonable accommodations, but McLeod determined that these accommodations would prevent Whitten from fulfilling her job’s essential function of travelling to the company’s different campuses to collect stories.[4]  Whitten was placed on medical leave and ultimately terminated.[5]

            Whitten filed a complaint with the Equal Employment Opportunity Commission (“EEOC”), prompting EEOC to bring a suit against McLeod on Whitten’s behalf. The district court granted summary judgment to McLeod on both claims and the EEOC appealed.[6]  The issue before the Court was whether McLeod violated the Americans with Disabilities Act (“ADA”) by (1) requiring Whitten to undergo medical exams despite a lack of evidence that the exams were necessary (“illegal-exams” claim); and/or (2) terminating Whitten on the basis of her disability (“wrongful-discharge” claim).[7]

EEOC’s Arguments

            On appeal, the EEOC argued that summary judgment was not appropriate on either claim because there was sufficient evidence for a reasonable jury to rule in favor of the EEOC.[8]

            Under the ADA, an employer may not require an employee to undergo a medical exam unless the exam is job-related and consistent with business necessity.  Specifically, the employer must reasonably believe the employee’s ability to perform an essential job function is limited by a medical condition or that, due to a medical condition, the employee’s performance of an essential job function would pose a direct threat to the safety of the employee or others.[9]  The EEOC appealed summary judgment on the illegal exams claim by arguing that it had provided enough evidence for a reasonable jury to conclude that travelling to the company’s different campuses was not an essential function of Whitten’s job.[10]  McLeod’s description of Whitten’s position did not include travelling to McLeod’s campuses, and Whitten could gather information for the employee newsletter over the phone.  Also, the EEOC argued that McLeod’s belief that Whitten’s falls made her a direct threat was unreasonable because her falls did not cause injury.[11]

            Furthermore, to establish a wrongful-discharge claim a plaintiff must prove (1) she has a disability; (2) she is a qualified individual; and (3) her employer took adverse employment action against her because of her disability.[12]  The EEOC claimed that the first and third elements were clearly met and that it had presented enough evidence on the second element to preclude summary judgment.[13]  A qualified individual must be able to perform the essential functions of the job with or without a reasonable accommodation.[14]  The EEOC argued that a reasonable jury could determine, based on the evidence presented for the illegal-exams claim, that Whitten was a qualified individual because travelling was not an essential function of her job.[15]

McLeod’s Arguments

            On appeal, McLeod argued that summary judgment on both the illegal-exams claim and the wrongful-discharge claim was appropriate.[16]

            Specifically, in regards to the illegal-exams claim, McLeod argued that it did not violate the ADA by requiring Whitten to undergo work-related medical exams because it reasonably believed, based on objective evidence, that Whitten could not perform an essential function of her job without posing a direct threat to herself.[17]  McLeod claimed, and the district court agreed, that one of the essential functions of Whitten’s job was to navigate to and within the medical campuses.[18]  Thus, McLeod argued, the medical exams did not violate the ADA because McLeod believed Whitten’s disability rendered her unable to travel to and within the company’s different campuses without posing a direct threat to herself.[19]

            With respect to the wrongful-discharge claim, McLeod argued that summary judgment was appropriate because Whitten was not a “qualified individual” within the meaning of the ADA.  Specifically, McLeod asked the Court to affirm on the basis that the EEOC had not proven Whitten was a “qualified individual;” the medical exams indicated she could not perform an essential function of her job, regardless of whether she was provided with a reasonable accommodation.[20]

Holding: Summary Judgment Inappropriate as to Both Claims

            The Fourth Circuit reversed summary judgment on both claims and remanded the case to the lower court.[21]  Reviewing the grant of summary judgment on both claims de novo, the Court disagreed with the district court’s determination that McLeod had showed there was no genuine dispute as to a material fact; therefore, summary judgment was inappropriate.[22]

            The Court examined the evidence presented by both parties but disagreed with the district court’s finding that the EEOC failed to produce enough evidence for a jury to rule in its favor.[23] The Court acknowledged that the record contained evidence supporting McLeod’s position that it reasonably believed, based on objective evidence, that Whitten could not navigate to or within its campuses without posing a direct threat to herself.[24]  Based on the testimony of one of Whitten’s superiors, as well as her own testimony agreeing that her job required her to “safely navigate marketing department functions,” the Court found that a reasonable jury court rule in favor of McLeod.[25]

            However, the Court also found that a reasonable jury, based on the evidence presented in the lower court, could rule in favor of the EEOC.[26]  The Court looked at McLeod’s own written description of Whitten’s job, which contained no mention of navigating to and from company events or conducting in-person interviews.[27]  Although Whitten testified that she believed she collected better content by travelling to McLeod’s campus locations, she did not believe it was an “essential” function of her job because she could collect information and conduct interviews over the phone.[28]  Because the Court determined that the EEOC had produced “more than a scintilla of evidence” in support of its position that navigating to and from McLeod’s campus locations was not an essential function of Whitten’s job, the Court reversed summary judgment as to the illegal-exams claim.[29]

            The Court noted that even if the EEOC had failed to produce enough evidence that navigating to and from campus locations was an essential function of her job, McLeod would still not be entitled to summary judgment.[30]  The Court analyzed what McLeod knew before it required Whitten to take the medical exams; specifically, that (1) McLeod knew Whitten had performed the essential function of her job for twenty-eight years, despite her disability; (2) Whitten had recently fallen several times (once at work), none of which resulted in any severe injuries; (3) Whitten missed deadlines, came in late, and struggled with her workload; and (4) Whitten’s supervisor noted she recently appeared winded and groggy.[31]  The Court determined that a reasonable jury, based on the evidence, could have found that McLeod lacked a reasonable, objective basis for requiring Whitten to undergo work-related medical exams.[32]

            As to the wrongful-discharge claim, the question at issue was whether the EEOC had produced enough evidence to convince a jury that Whitten was a “qualified individual” within the meaning of the ADA.[33]  The Court noted that the district court, in analyzing the “wrongful-discharge” claim, relied on its finding that navigating to and from McLeod’s campus locations was an essential function of Whitten’s job.[34]  Because the medical exams had revealed that no reasonable accommodation would permit Whitten to perform that function, the district court concluded that the EEOC had not proven Whitten was qualified to continue her work with the company’s employee newsletter.[35]  However, because the Court had already determined that it was uncertain whether navigating to and from McLeod’s campus locations was an essential function of Whitten’s job, and because the medical exams may have been unlawful, the Court held that McLeod was not entitled to summary judgment.[36]

Conclusion

            Ultimately, the Fourth Circuit held that McLeod was not entitled to summary judgment on either of the EEOC’s ADA claims and remanded for further proceedings.[37]  The Court held that a reasonable jury could conclude that travelling was not an essential function of Whitten’s job.[38]  If a jury made this determination, then there could be sufficient evidence (1) that McLeod’s required medical exams were illegal; and (2) that Whitten was illegally terminated on the basis of her disability.[39]  This case is important because it provides an example of the level of evidence a plaintiff must offer to survive a summary judgment motion on ADA claims.  Also, this ruling sends a message to employers that the Fourth Circuit takes ADA claims very seriously, and it could encourage the EEOC to bring more ADA claims in this circuit.

[1] No. 17-2335, 2019 WL 385654, at *1 (4th Cir. Jan. 31, 2019).

[2] Id.

[3] Id. at *2.

[4] Id. at *3.

[5] Id.

[6] Id.

[7] Id.

[8] Id.

[9] Id.

[10] Id. at *4.

[11] Id.

[12] Id. at *5.

[13] Id.

[14] Id.

[15] Id.

[16] Id. at *3.

[17] Id. at *4.

[18] Id.

[19] Id.

[20] Id. at *5.

[21] Id.

[22] Id. at *3.

[23] Id. at *4–5.

[24] Id. at *4.

[25] Id. at *4.

[26] Id.

[27] Id.

[28] Id.

[29] Id.

[30] Id.

[31] Id.

[32] Id. at *5.

[33] Id.

[34] Id.

[35] Id.

[36] Id.

[37] Id.

[38] Id. at *4.

[39] Id. at *5.

By Jim Twiddy and Kayla West

United States v. Miguel Zelaya

In this criminal case, the Fourth Circuit affirmed the trial court’s convictions of Miguel Zelaya, Luis Ordonez-Vega, Jorge Sosa, and William Gavidia. Each were convicted of participating in a racketeering conspiracy under the Racketeer Influenced and Corrupt Organizations Act (“RICO”). Some of the defendants were also convicted of committing violent crimes in related and unrelated events. Appellants were members in the gang, MS-13. Each of the defendants were charged with violent action associated with their racketeering activity. Sosa and Gavidia moved for severance because they had not been charged with murder, unlike the other defendants. Ordonez-Vega moved to exclude testimony from New York police officers who had knowledge about his previous gang affiliation in New York. Sosa moved for mistrial based on a witness’ reference to an uncharged MS-13 murder during her testimony to establish Sosa as a gang member. Gavidia moved for a new trial following the verdict. All four Appellants moved for a judgment of acquittal based on insufficient evidence. All of these motions were denied. Appellants raised multiple issues on appeal including the denial of their motion for acquittal. Sosa and Gavidia challenged the denial of their motions for severance and new trials, Ordonez-Vega challenged the admission of certain evidence, Sosa challenged the jury instructions, and Gavidia challenged his sentence. The Fourth Circuit addressed each of these challenges in turn, articulating the relevant standard for each conviction and applying that standard for the facts relevant to each challenge. Essentially, all of these claims turned on whether there was sufficient evidence for a reasonable jury to come to the conclusions from the trial court. In each of these challenges, the Fourth Circuit found that there was sufficient evidence to support all of the jury’s findings. All of challenged trial court holdings were affirmed. Judge Floyd, dissenting in part, argued that, with respect to some of these convictions, the government lacked sufficient evidence to show that the violence was connected to membership in a gang.

 

Catherine D. Netter v. Sheriff BJ Barnes

In this civil case, Appellant argued that her unauthorized review and disclosure of confidential personnel files to support her racial and religious discrimination claims constituted protected activity under Title VII. Appellant filed a complaint with her employer and the EEOC. Appellant reviewed, copied, and supplied the confidential personnel files to support her claims. After she was discharged by her employer, she filed a new charge with the EEOC. The EEOC dismissed the charged but allowed her to supplement her existing Title VII discrimination complaint with a new retaliation claim. After discovery, the district court granted summary judgment to Appellant’s employer on all claims. Appellant filed an appeal, challenging only the portion of the district court’s order that concerns her retaliation claim. The Fourth Circuit held that Appellants actions were in violation of N.C. Gen. Stat. § 153A–98(f) which establishes a Class 3 misdemeanor for “knowingly and willfully examin[ing] . . . , remov[ing] or copy[ing] any portion of a confidential personnel file” without authorized access. Further, illegal actions do not constitute a protected activity for participation clause claims under Title VII. Thus, the Fourth Circuit affirmed the decision of the district court.

By Mackenzie Bluedorn and Jacqueline Canzoneri

Relevant Facts

This case began as an age discrimination claim.  The Equal Employment Opportunity Commission (“EEOC”) initially challenged that Baltimore County’s (“County”) retirement plan violated the Age Discrimination in Employment Act (“ADEA”) because its age-based contributions required older employees to pay higher percentages of their salaries.[1]  When adopting its retirement benefit plan in 1945, the County stated that employees were eligible to retire and receive pension benefits at the age of 65, no matter how long the individual had actually been employed and contributing the plan.[2] Because the payments of an employee who joined the plan at an older age would accrue less interest than payments made by younger employees before the employees actually started to draw from the fund, the County determined that older employees should be charged higher rates.[3] Although the retirement benefit plan was amended several times over the years, the different contribution percentages based on age were never fully eliminated.[4] In response to this policy, the EEOC first brought civil suit in the District Court of Maryland in 2007, requesting injunctive relief to bar the discriminatory contribution percentages and reimburse employees subject to the age discrimination through back pay.[5]

 

Procedural Posture

This opinion was the third issued in a series of appeals for this case.  In 2010, the court of appeals initially reversed and remanded the district court’s holding in favor of Baltimore County, prompting the district court to reconsider whether the retirement benefit rates violated the ADEA.[6]  The issue once again reached the court of appeals for opinion in 2014. The second time, the district court had determined that the rates were impermissible and granted partial summary judgment on liability in favor of the EEOC, but the court of appeals then remanded again for consideration of damages.[7]  Although the parties had entered into a consent order for injunctive relief, the order did not discuss monetary relief and stated that the issue would be considered on a later date.[8]

The case then reached the court of appeals for a third time in 2018 after the EEOC appealed the district court’s determination on damages that it had discretion to deny an award of back pay otherwise afforded under the ADEA.  In reaching its decision, the district court held that it had discretion over whether or not to award that remedy or, in the alternative, that even if back pay were mandatory under enforcement of the ADEA, the court’s equitable powers still granted it the authority to deny back pay because the EEOC delayed so long in originally bringing this case.[9] The underlying issue for the court of appeals to consider on this third appeal was under the ADEA, is the monetary award of retroactive back pay discretionary, after liability has been established.

 

Plaintiff-Appellant Argument: Equal Employment Opportunity Commission (“EEOC”)

While Baltimore County grounded its argument in statutory language of the ADEA, the EEOC highlighted specific Fair Labor Standards Act (“FLSA”) provisions that have been incorporated into the ADEA.[10]  Most notably, the ADEA adopted the FLSA provision that violators “shall be liable” for back pay.[11] The EEOC argued that because back pay is a mandatory legal remedy under the FLSA, and because the ADEA adopted this language, it is not a discretionary issue. The choice of language reflected Congress’ intent that remedies under both of these statutes should be construed in the same manner. Thus, the District Court lacked discretion to determine whether back pay was owed.

 

Defendant-Appellee Argument: Baltimore County (“County”)

Baltimore County argued that back pay was properly denied because the district court is granted wide authority under the ADEA.  Specifically, the County claimed that the court has broad authority under 29 U.S.C. § 626(b) “to grant such legal or equitable relief as may be appropriate,” which could include the denial of back pay.[12]  Under broad authority, the court should be allowed to determine appropriate remedies, similar to the discretionary nature of back pay under Title VII. The County tried to expand precedent, by relying on various United States Supreme Court cases regarding Title VII pension issues.[13]  In those cases, the Court held that retroactive monetary awards are discretionary under Title VII and did not award any retroactive monetary relief.[14]

As the district court itself determined following the second remand of this case, it would be equitable to deny back pay in this instance, even if it were mandatory under the ADEA, because the EEOC had delayed initiating this suit for years.[15]  The County emphasized the long delay in the EEOC’s action, which led to the County incurring substantially more liability in back pay.[16]

 

Holding & Rationale

The Court of Appeals for the Fourth Circuit agreed with the EEOC’s interpretation of the ADEA’s language and concluded that retroactive monetary award of back pay is mandatory, not discretionary, upon the finding of liability.  The initial matter of liability was already decided through issuance of partial summary judgment in favor of the EEOC following the first remand of the case. To assess the statutory language of the ADEA, the court considered the plain language of the statute, congressional intent, United States Supreme Court precedent, and legislative history.

The court addressed the plain language of enforcement under 29 U.S.C. § 626(b).  As a threshold matter, the court stated that the ADEA was a remedial statute and therefore warrants liberal interpretation. Furthermore, because specific FLSA language regarding back pay was incorporated into the ADEA enforcement provision, interpretation of the provision should mirror prior interpretations of the relevant back pay provisions in the FLSA.[17]  As such, under the FLSA, retroactive monetary damages are considered mandatory. Thus, by extension, there was an apparent congressional intent that such damages should also be mandatory under the ADEA.[18]

In regard to relevant precedent, the court’s touchstone of inquiry was a United States Supreme Court case, Lorillard v. Pons,[19] where the Court applied a similar analytical framework while interpreting another portion of the ADEA.[20]  There, the Court stated that since the ADEA adopted specific FLSA language, it should be interpreted as its original counterpart was interpreted.[21] The Fourth Circuit also rejected the County’s reliance on the Title VII pension cases because there, back pay was an equitable remedy, whereas here under the ADEA, back pay would be a legal remedy.[22]

Next, the court considered legislative history.  While drafting the enforcement clause of the ADEA, Congress was faced with various potential enforcement mechanisms.[23]  Ultimately, Congress specifically chose to incorporate FLSA remedial measures into the ADEA.[24] This conscious decision of incorporation, and rejection of other options, is relevant legislative history that assists with judicial interpretation of statutory language.[25]

Finally, the court next addressed the district court’s alternative holding that, even if the statutory language indicated back pay was mandatory, the court still had discretion through its equitable powers.  The court of appeals fully rejected the district court’s comparison of the ADEA to Title VII, under which the Supreme Court had held that retroactive monetary awards were, in fact, discretionary.[26] The court of appeals explained that an award of back pay under Title VII was up to a court’s discretion because it was an equitable remedy; under the ADEA, however, back pay was a legal remedy, and only the amount of back pay was open-ended, to be determined at the discretion of the factfinder.[27]

 

Conclusion

The district court’s opinion was vacated and remanded for the consideration of the amount of back pay owed to the affected employees under the ADEA.

 

 

[1] EEOC. v. Baltimore Cty., 747 F.3d 267, 1–2 (4th Cir. 2014).

[2] Id. at 3.

[3] Id. at 4–5.

[4] Id. at 6.

[5] Id. at 7.

[6] EEOC. v. Baltimore Cty., No. 16-2216, 2018 U.S. App. LEXIS 26644, at *2 (4th Cir. Sept. 19, 2018).

[7] Id.

[8] Id.

[9] Id. at *2–*3.

[10] Id. at *4–*5.

[11] Id. at *5.

[12] Id. at *3.

[13] Id. at *9.

[14] Id.

[15] Id. at *3.

[16] Id. at *11.

[17] Id. at *5–*6.

[18] Id. at *7.

[19] 434 U.S. 575 (1978).

[20] Baltimore Cty., 2018 U.S. App. LEXIS 26644, at *8.

[21] Id.

[22] Id. at *10.

[23] Id. at *8.

[24] Id. at *9.

[25] Id.

[26] Id. at *10.

[27] Id.

 

 

 

 

 

By: Thomas Cain & Noah Hock

Equal Employment Opportunity Commission v. Baltimore County

In this case, the Equal Employment Opportunity Commission (“EEOC”) sought back pay for employees based on Baltimore County’s discriminatory practice involving improper contribution rates to the county’s age-based employee benefit plan. The district court found the county liable under the Age Discrimination in Employment Act (“ADEA”) and granted the EEOC partial summary judgment, but it denied a motion for back pay because the EEOC’s undue delay in investigating substantially increased the county’s back pay liability. The Fourth Circuit vacated the district court decision, ruling that an award of back pay is mandatory under the ADEA after a finding of liability. Thus, the case was remanded for a determination of back pay amounts to which affected employees are entitled.

By: Lanie Summerlin

Henderson v. Bluefield Hosp. Co.

In this civil appeal, the National Labor Relations Board (“NLRB”) appealed the District Court’s refusal to grant preliminary injunctive relief under section 10(j) of the National Labor Relations Act. The NLRB sought preliminary injunctions against two hospitals until NLRB agency adjudication of a complaint filed against the hospitals by the National Nurses Organization Committee (“Union”) was complete. The injunctions would have required the hospitals to bargain with the Union in good faith, and NLRB argued the injunctions were necessary to protect the nurses’ fundamental right to be represented through collective bargaining. The District Court denied these injunctions because it ruled the NLRB failed to prove this type of relief was necessary to preserve the remedial power of the NLRB. The Fourth Circuit affirmed the District Court’s decision and emphasized that the NLRB has the burden of proving irreparable harm absent the injunction. Ultimately, the Fourth Circuit held the NLRB failed to meet this burden because its theories of harm were speculative; the NLRB failed to explain why its own forms of relief available after completion of the agency process would be insufficient.

U.S. v. Bell

In this criminal appeal, Quintin Bell (“Bell”) challenged his convictions of four counts of drug trafficking and one count of illegal possession of a firearm. Bell argued the District Court erred in (1) denying his motion to suppress statements he made to police officers who were executing a search warrant on his residence; (2) admitting evidence of another arrest of Bell under Federal Rules of Evidence Rule 404(b); (3) denying Bell’s motion to disclose the identity of a confidential informant; and (4) enhancing Bell’s sentence to 480 months’ imprisonment due to his prior convictions. The Fourth Circuit held the District Court did not err in denying Bell’s motion to suppress his statements because Bell was not being interrogated at the time the statements were made; the officer’s question was directed to Bell’s wife and Bell voluntarily answered. The Fourth Circuit also held the District Court did not abuse its discretion by admitting evidence of Bell’s other arrest because this evidence’s relevance to Bell’s motive and intent was not substantially outweighed by the risk of unfair prejudice to Bell. In regards to the confidential informant, the Fourth Circuit held the District Court did not err in refusing to disclose the informant’s identity because Bell failed to prove the informant’s identity was necessary to establish his own guilt or innocence. The Fourth Circuit also reviewed Bell’s criminal record and held that his 480 month sentence was appropriate due to the nature of the crimes on his record. Overall, the Fourth Circuit affirmed Bell’s convictions. Judge Wynn dissented; he argued the Fourth Circuit should have remanded the issue of Bell’s statements to police officers to the District Court for a determination of whether Bell perceived himself as being interrogated. Judge Wynn also argued that Bell’s prior convictions do not qualify as predicate convictions to enhance his sentence.

VanDevender v. Blue Ridge of Raleigh

This civil appeal focuses on the District Court’s decisions as to two judgment as a matter of law (“JMOL”) motions filed by Blue Ridge of Raleigh (“Blue Ridge”). Blue Ridge operated a long-term skilled nursing facility in Raleigh, North Carolina, but consistently failed to meet state-mandated staffing levels and supplies requirements. The estates of three deceased ventilator-dependent patients at Blue Ridge brought claims of wrongful death nursing home malpractice against Blue Ridge. The jury awarded compensative and punitive damages to each Plaintiff. However, the District Court granted Blue Ridge’s motion for JMOL as to all three Plaintiffs’ punitive damages awards because it ruled the Plaintiffs had not produced sufficient evidence. The District Court denied Blue Ridge’s motion for JMOL as to Plaintiff Jones’s compensatory damages. Plaintiffs appealed the JMOL as to their punitive damages, and Blue Ridge cross-appealed the denial of JMOL as to Plaintiff Jones’s compensatory damages. The Fourth Circuit held the District Court erred in granting JMOL as to the Plaintiffs’ punitive damages. Based on the record, the Fourth Circuit held that a jury could determine Blue Ridge’s staffing policies and managerial decisions constituted willful or wanton conduct. It held that the District Court erred by requiring the Plaintiffs to prove malice, which is not required for willful or wanton conduct. The Fourth Circuit emphasized that Blue Ridge failed to follow state and federal laws on staffing and intentionally failed to follow its own patient safety policies. Additionally, the Fourth Circuit affirmed the District Court’s denial of Blue Ridge’s JMOL motion as to Plaintiff Jones’s compensatory damages. There was sufficient evidence that Blue Ridge breached the standard of care it owed to Plaintiff Jones by being understaffed without proper supplies. The Fourth Circuit remanded with instructions for the District Court to enter punitive damages for all three Plaintiffs consistent with North Carolina’s statutory limits.

By: Katherine Wenner & Holly Ingram

A. Overview

On November 17th, the Fourth Circuit published an opinion for Schilling v. Schmidt Baking Co., Inc.. The Court considered whether the District Court erred in its dismissal of Plaintiffs’ claims under the FLSA. The Fourth Circuit reversed the District Court’s dismissal and held that Plaintiffs fell within a group of “covered employees” under the Technical Corrections Act of 2008’s exception to the FLSA and thus were entitled to overtime wages for hours they worked in excess of forty hours per week.

B. Facts and Procedural History

The Plaintiffs, Ronald Schilling, Russel Dolan, and Jonathan Hecker (collectively, “Plaintiffs”), worked as district sales managers for Schmidt Baking Company, Inc. (“Schmidt”). There, they were considered nonexempt salaried employees. Plaintiffs frequently worked more than forty hours per week; however, for all hours worked Plaintiffs were paid their regular wage rate and did not receive overtime wages for hours worked beyond forty hours per week.

Schmidt provides baked goods to restaurants, grocery stores, and small business across the Mid-Atlantic. Schmidt contracted with independent operators to execute some of their deliveries. Additionally, Schmidt maintained a mixed fleet of company vehicles at each of their depots, including some vehicles which weighed under 10,000 pounds and others weighing over 10,000 pounds.

In the event that various delivery operators were unable to perform their delivery duties, Plaintiffs delivered the necessary baked goods. Plaintiffs spent between 65%-85% of their time each week performing deliveries, the majority of which were made in their personal vehicles weighing less than 10,000 pounds.

Plaintiffs filed this federal action alleging that they were entitled to payment of overtime wages under the Fair Labor Standards Act and various Maryland labor laws. Schmidt moved to dismiss the complaint for failure to state a claim for which relief can be granted and in the alternative, moved for summary judgment. The District Court treated Schmidt’s motion as a motion to dismiss, and granted it without a hearing. Plaintiffs appealed. At oral arguments, Plaintiffs conceded that were it not for the Technical Corrections Act of 2008 exception, they would be excluded from overtime compensation under the FLSA.

C. Employees driving vehicles in a mixed fleet are entitled to overtime wages under the Technical Corrections Act of 2008.

To determine whether Plaintiffs were entitled to overtime, the opinion began with an overview of the Fair Labor Standards Act (“FLSA”) and the statutory scheme at issue. The FLSA establishes a federal minimum wage to combat the dangers of long working hours, which may pose negative health implications for employees. There are, however, certain classes of employees exempt from overtime protections and one such class is employees falling under the Motor Carrier Act (“MCA”) Exemption. In 2005 and 2008 Congress amended the MCA Exemption to clarify that certain employees were subject to the FLSA’s overtime requirements. Now, FLSA overtime requirements apply to certain “covered employees,” which includes “an individual”:

(1) who is employed by a motor carrier or motor private carrier . . .;

(2) whose work, in whole or in part, is defined—

(A) as that of a driver, driver’s helper, loader, or mechanic; and

(B) as affecting the safety of operation of motor vehicles weighing 10,000 pounds or less in transportation on public highways in interstate or foreign commerce . . . ; and

(3) who performs duties on motor vehicles weighing 10,000 pounds or less.

SAFETEA–LU Technical Corrections Act of 2008 Pub. L. No. 110–244 § 306(c)(1)–(3) (2008) (emphasis added). Thus, employers may be obligated to pay overtime to employees under the FLSA, if the employee is “covered.” Consequently, the central issue in this case was whether Plaintiffs were “covered employees.”

In addition to considering persuasive authority from the Third Circuit, the Court held that Plaintiffs were “covered employees” after examining the text, structure, and intent of the statute at issue. First, the Court explained that in McMasters v. Easter Armored Services, Inc., the Third Circuit concluded that when an employee spends some time driving vehicles over 10,000 pounds and some time driving vehicles under 10,000 pounds, such employees may still fall within the “covered” definition. 780 F.3d 167, 168–70 (3d Cir. 2015). The Court then proceeded to analyze the text, structure, and intent of Congress’s 2008 amendment to the MCA Exemption. It concluded that Congress mandated certain drivers be entitled to overtime compensation and that the statute allows a driver to only partially work with a vehicle under 10,000 pounds. Additionally, the Court noted that there was no evidence Congress intended for employees working in a mixed fleet to be exempt from overtime compensation. The Court did not create a strict definition of how much time is enough to constitute “in part,” but its decision indicates that employees operating in a mixed fleet may be entitled to overtime pay, despite the MCA Exemption.

Here, the Court concluded that the Plaintiffs satisfied the statute’s requirements for “covered employees.” Though at times Plaintiffs drive vehicles weighing over 10,000 pounds, because they spend a majority of their working hours driving vehicles weighing less than 10,000 pounds, they easily satisfy the “in part” requirement. Thus, the Court held Plaintiffs were entitled to FLSA overtime wages.

D. Conclusion

The Fourth Circuit reversed the District Court’s dismissal of Plaintiffs’ FLSA claims. The Plaintiffs were “covered employees” under the Technical Corrections Act of 2008, thus were entitled to overtime wages under the FLSA.

Weekly Roundup: 11/6-11/10
By: Tim Day & Jonathan Hilliard

Plotnick v. Computer Sciences Corp.
             In this civil case, the plaintiffs, former executives of Computer Sciences Corporation (“CSC”), filed suit against CSC, alleging they were denied benefits under their Deferred Compensation Plan for Key Executives after an amendment to the plan changed the applicable crediting rate.  The Fourth Circuit affirmed the district court’s grant of summary judgment for CSC, holding that the denial of benefits was proper under any standard of review.

By M. Allie Clayton

Today, in the civil case of Barton v. Constellium Rolled Products-Ravenswood, LLC., a published opinion, the Fourth Circuit affirmed the District Court in granting summary judgment for the company. The court stated that the governing collective bargaining agreement did not provide for vested retiree health benefits, and thus the former employer was within their power to unilaterally alter its retiree health benefits program.

Facts

A class of retirees and their union, The United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industry & Service Workers International Union AFL-CIO/CLC (“The Union”), filed this action. The union had represented the retirees since 1988 and had negotiated collective bargain agreements with their previous employer—Constellium Rolled Products-Ravenswood, LLC (“Constellium”).

The Parties’ Agreement

There was a specific provision of their collective bargaining agreement (“CBA”) that governed group health insurance benefits: Article 15. The 2010 provision of Article 15 stated:

  1. The group insurance benefits shall be set forth in booklets entitled Employees’ Group Insurance Program and Retired Employees’ Group Insurance Program, and such booklets are incorporated herein and made a part of the 2005 Labor Agreement by such reference.
  2. It is understood that this agreement with respect to insurance benefits is an agreement on the basis of benefits and that the benefits shall become effective on July 15, 2010, except as otherwise provided in the applicable booklet, and further that such benefits shall remain in effect for the term of this 2010 Labor Agreement.

In addition to Article 15 and the various booklets incorporated by reference therein (which operated as summary plan description (“SPD”)), Constellium (or its predecessors) and retirees agreed to further parameters governing retiree health benefits that were contained in “Cap Letters.” The cap letters throughout the years governed how Constellium (or its predecessors) would allocate health care spending of employees based on pre- and post-January 2003 retirees. The third cap letter, which took effect on January 1, 2011, was unique in that it took effect after the concurrently-negotiated collective bargaining agreement did.

The Unilateral Change Leading to Litigation

While the parties were negotiating a new CBA in July 2012, Constellium proposed a change to Article 15 that would extend the cap on its contributions to retiree health benefits to those who retired before January 1, 2003, and freeze its Medicare Part B premium reimbursement amount for all hourly retirees at $99.90. The Union refused to bargain about this issue because it asserted that the retiree health benefits had already vested. Constellium notified the Union that it planned to make those changes on January 1, 2013, and made those changes on that day.

Procedural History

After discovery, the parties filed cross-motions for summary judgment. The district court granted the company’s motion and dismissed the case.

The Issue

Did Constellium’s unilateral alteration of those benefits breach its obligations under the CBA?

Reasoning

The Supreme Court in M&G Polymers USA, LLC v. Tackett stated that courts must “interpret collective-bargaining agreements, including those establishing ERISA plans, according to ordinary principles of contract law, at least when those principles are not inconsistent with federal labor policy.” Therefore, as this court was interpreting the collective bargaining agreement with the parties, it was bound by ordinary contract principles. Those ordinary contract principles included the rule that states that in order to find that the retiree health benefits vested, there must be unambiguous evidence that indicates that the parties intended that outcome.

The Fourth Circuit found that the plain language of the CBA and the SPD indicated that the benefits did not vest. They found that there was explicit durational language in the retiree health benefits SPDs. Bolstering that conclusion was the contrast of the retiree health benefits section with a different section of the SPD that stated unambiguously that the pension plans cannot be reduced and they are paid monthly for the participants. Because the language was unambiguous in another section, it clearly demonstrated that the parties knew how to express their intent that certain benefits should vest.

Disposition

Because there were clear temporal limitations on the employee health benefits, the retirees’ and the Union’s arguments that the benefits had already vested cannot be upheld. Therefore, the grant of summary judgment in favor of Constellium by the district court is affirmed.

By Ali Fenno

On November 22, 2016, the Fourth Circuit issued a published opinion in the civil case of UBS Financial Services, Inc. v. Padussis. In UBS Financial, the Fourth Circuit addressed whether an arbitration award of over $900,000 to Gary Padussis (“Padussis”) could be vacated or modified in light of Padussis’s insolvency and UBS Financial Services’ (“UBSFS”) lack of participation in the selection of the arbitrators. In affirming the district court, the Fourth Circuit held that there was no basis for overturning the arbitrators’ award and that UBSFS’s motion should be dismissed in its entirety.

Facts of the Case and Procedural History

Padussis began working for UBSFS in 2009, bringing with him a team of financial advisors and an established list of clients. As part of his initial compensation, UBSFS granted Padussis a $2.7 million loan, for which he signed a promissory note that provided the balance of the loan would become fully due in the event he ended his employment with UBSFS. Also executed by Padussis was a Letter of Understanding describing his compensation and a Financial Advisor Team Agreement that governed the operations of his team. Each agreement entered into by the parties provided that any dispute would be subject to arbitration before the Financial Industry Regulatory Authority (“FINRA”).

Two years later, Padussis resigned from UBSFS on the grounds that it had ruined his team of financial advisors and cost him valuable clients. When he did not pay the $1.6 million remaining balance on the promissory note, USBS initiated arbitration proceedings.  Padussis responded with counterclaims alleging that UBSFS’s interference with his team of financial advisors and clients amounted to tortious conduct and a breach of contractual duties.

Pursuant to the FINRA Code of Arbitration Procedure for Industry Disputes (the “FINRA Code”), the Director of FINRA Dispute Resolution (the “Director”) mailed a list of potential arbitrators to Padussis and USBFS on August 21, 2013. Each party was then supposed to indicate their preferences by striking four arbitrators from the list and ranking the remaining ones. The lists were to be returned to the Director within 20 days of their being sent so he could then select a three-person arbitration panel based on those rankings. Padussis returned his list of preferences within the proscribed time, but USBFS did not, allegedly because it never received the list from the Director.

On September 11, UBSFS received a letter, dated September 3, reminding the parties to return their list of preferences by the September 10 deadline. It then filed a motion to extend the deadline. Padussis opposed the motion, claiming that UBSFS had notified him in mid-August that it was transferring to new counsel and that the list of preferences had not yet been sent. Padussis argued that this transfer of counsel caused confusion over who was sending the list and was the reason the list was never sent.

Although FINRA Rule 13207(c) allows a Director to extend the Code’s deadlines for good cause, FINRA’s Regional Director, acting for the Director as consistent with FINRA Rule 13100(k), denied UBSFS’s motion. The Director affirmed the denial, finding that UBSFS did not have good cause to extend the deadline because the list of arbitrators and a courtesy reminder of the deadline were both timely mailed, and FINRA did not receive any mail returned as undeliverable. Accordingly, FINRA proceeded with the arbitration process and selected a three-person panel of arbitrators based off of Padussis’s list of preferences.

UBSFS challenged the composition of the panel based on his lack of participation in the selection of the arbitrators, but his challenge was denied. Then, on October 27, 2014, the panel issued its final decision, awarding UBSFS $1,683,262 for the balance on the promissory note and Padussis $932,887 for damages UBSFS caused to his business.

However, faced with a statutory lien and the prospect of bankruptcy, Padussis admitted that he could not pay the full $932,887, leaving UBSFS in a position of owing Padussis over $900,000. UBSFS subsequently filed the present action to vacate the award on the grounds that UBSFS did not participate in the arbitrator selection process. It argued in the alternative that the award should be offset because of Padussis’s admission of being unable to pay the award owed to UBSFS.

The district court declined to vacate the arbitration award and to impose an offset, and UBSFS appealed.

Narrow Standard of Review

The Fourth Circuit first established the extremely narrow scope of judicial review of an arbitration award. It noted that an arbitration award should only be modified if it is one of the limited circumstances listed in the Federal Arbitration Act, or if under common law, it “fails to draw its essence from the contract” or “evidence a manifest disregard of the law.” The court emphasized that in reviewing an arbitration award, whether an arbitrator did their job “well, or correctly, or reasonably,” is not the concern. Instead, courts should ask whether the arbitrators exceeded their powers because they did not meet certain thresholds of arbitrability such as not being appointed according to the parties’ agreement. Deference should be given to arbitrators on questions outside those thresholds that regard the merits of the case or procedural questions.

The court found support for this narrow scope in public policies that focus on using arbitration as a tool to avoid the costs and delays of litigation. It noted that parties entering into agreements to arbitration do so in the hope of avoiding “a protracted set of legal proceedings.” Narrowing the judicial review of arbitration awards furthers this intent.

Rightful Appointment of Arbitrators

The Fourth Circuit next addressed UBSFS’s claim that the arbitrators were not selected according to the parties’ agreement. It first confirmed that, pursuant to Section 5 of the Federal Arbitration Act, arbitration awards will be vacated where the arbitrators’ appointment violates the parties’ contract. It then noted that here, UBSFS and Padussis agreed that all disputes would be subject to arbitration before FINRA and thus subject to the FINRA Code.

However, the Fourth Circuit rejected UBSFS’s claim that the rules for selecting arbitrators were not followed. The court listed every step FINRA and the Director took in selecting the panel and noted that not a single requirement was skipped. And even though UBSFS did not get to participate in the selection of the arbitrators, the court found that this outcome was explicitly allowed in FINRA Rule 13404(d), which requires a Director to appoint arbitrators without a party’s input when the list of arbitrators is not returned.

Because FINRA clearly followed the FINRA Code’s rules for selecting arbitrators, the Court decided that the issue raised by UBSFS was instead whether FINRA properly applied the rules when it found that UBSFS did not have good cause to extend the deadline for submitting its list of preferences. But the Fourth Circuit concluded that this constituted a procedural question, and relying on the Supreme Court’s decision in Howsam v. Dean Witter Reynolds, Inc., affirmed that such a “procedural question[] which grow[s] out of the dispute and bear[s] on its final disposition [is] presumptively not for the judge, but for the arbitrator, to decide.” The court also noted that the power to determine whether good cause existed was explicitly given to FINRA in FINRA Rule 13412. Furthermore, the court reasoned that arbitrators would be more expert about the issue because it concerned, as stated in Dockser v. Schwartzberg, “the written rules governing the parties’ proceeding.” Accordingly, the Court refused to question FINRA’s decision that there was not good cause for extending the deadline for returning the list of preferences.

Refusal to Reduce the Award

The court next addressed UBSFS’s request for the arbitral award to be offset based on Padussis’s admission of being unable to pay his portion of the award. The court first noted that complying with UBSFS’s request would result in a net profit for UBSFS and thus eliminate any damages he might owe to Padussis. It also found that the offset would constitute a modification of the arbitration award because the agreement explicitly denied “any and all relief not specifically addressed” in the arbitrators’ final decision, which never mentioned the possibility of an offset.

Pursuant to the Federal Arbitration Act, a court may modify an award if it will effectuate the intent of the arbitrators. Here, the court concluded that this modification would not effectuate the intent of the arbitrators because the award never mentioned an offset and there is no other evidence in the record suggesting such an intention. UBSFS contended that the offset of the award would reflect the intent of the arbitrators because it would provide a “simple, fair result” without changing the arbitrators’ valuation decision. But the court rejected this claim, reasoning that UBSFS should have determined the arbitrators’ intent by asking for an offset during the arbitration proceedings. Accordingly, because evidence in the record and the arbitration award did not indicate that the intent of the arbitrators would be effectuated by an offset, the Fourth Circuit chose to not impose an offset on these grounds.

UBSFS last claimed that the offset should be imposed regardless of the arbitrators’ actual intent and that the court should recognize a presumption favoring an offset. The court disagreed, reasoning that such an action would put a “judicial gloss” on the arbitration award. A judicial gloss on this award would be impermissible because the award explicitly limited itself to the relief specifically rendered in the arbitrators’ final decision.

Accordingly, because the intent of the arbitrators would not be effectuated by the offset, and because a presumption of an offset would directly conflict with the arbitrator’s final decision, the court held that granting an offset in this case would be inappropriate.

Conclusion

The Fourth Circuit concluded that UBSFS simply did not want to abide by a result it did not like. Because UBSFS had agreed to arbitration, the dispute was within the scope of that agreement, and the rules for arbitration were selected in the agreement and then followed, the court could find no reason to vacate or modify the award. Accordingly, it affirmed the district court’s decision to deny UBSFS’s motion in its entirety.