A major new test of the power of employers to use prior salary history to justify wage disparities between male and femaleemployees is inching closer to the U.S. Supreme Court aftersettlement talks failed to resolve the closely-watched dispute.

Lawyers from Jones Day, representing a California schooldistrict, have received extra time to file a petition by Sept. 4,according to court filings. The Fresno schooldistrict lost in the U.S. Court of Appeals for the Ninth Circuit,which said an employee's salary history can't be used to justifypaying men and women differently for comparable jobs.

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The pay equity case Yovino v Rizo spotlights a commonhiring practice that equal pay advocates argue institutionalizesthe gender wage gap in which women make 80cents on the dollar on average to men in comparable positions.Management-side firms predicted the case could push employers toexamine their pay practices.

“The Equal Pay Act stands for a principle as simple as it isjust: men and women should receive equal pay for equal workregardless of sex,” the late Judge Stephen Reinhardt wrote in theNInth Circuit's ruling in April. “The questionbefore us is also simple: can an employer justify a wagedifferential between male and female employees by relying on priorsalary? Based on the text, history, and purpose of the Equal PayAct, the answer is clear: No.”

Aileen Rizo, the lead challenger, contends she makes thousandsof dollars less than similarly situated male colleagues. The actionin the Supreme Court was on pause as Fresno attempted to settle thecase, court filings show.

A lawyer for Fresno, Jones Day partner Shay Dvoretzky, said onAug. 13 that settlement talks have stopped and that he is nowpreparing to file a petition at the Supreme Court challenging theNinth Circuit opinion.

Dvoretzky did not immediately respond to request for comment.Dan Siegel of Siegel, Lee & Brunner in Oakland, representingAileen Rizo, did not respond to request for comment.

There is no certainty the Supreme Court would take the case, butcourts are divided and any petition would likely fuelfriend-of-the-court briefs. Two federal appeals courts—the Tenthand Eleventh circuits—previously held that prior pay alone cannotbe considered an exemption to equal pay laws. The Seventh Circuithas ruled that previous salary can be considered.

The U.S. Equal Employment Opportunity Commission urged the NinthCircuit to restrict the ability of employers to base new employees'starting pay on their most recent compensation. “Males in teachingand other education-related jobs continue to out-earn their femalecounterparts,” the agency said in a brief. “A practice ofbasing starting pay for new employees solely on what they earned intheir most recent prior job simply institutionalizes the gender paygap that studies confirm still exists.

Rizo, a Fresno County math consultant, sued in 2012 when shediscovered men were paid as much as $10,000 more in comparablepositions. The county justified this discrepancy because thecompensation level was set by her previous salary in an Arizonaschool district.

The en banc Ninth Circuit panel, which was fractured, found thatthis practice violates the Equal Pay Act.

Reinhardt, who died just before the ruling was published, wrotefor the majority: “Salaries speak louder than words.” The majorityruling found that “to accept the county's argument would perpetuaterather than eliminate the pervasive discrimination” that thefederal law aimed to protect.

“Women are told they are not worth as much as men,” Reinhardtwrote. “Allowing prior salary to justify a wage differentialperpetuates this message, entrenching in salary systems an obviousmeans of discrimination.”

Fresno's lawyers argued the school district's policy thatdetermines salaries was “absolutely gender-neutral, objective andeffective in attracting qualified applicants and complied with allapplicable laws.”

Several judges said the majority's ruling, expressed as ageneral rule, could pose challenging practical implications. JudgeMargaret McKeown and Judge Mary Murguia said in a concurringopinion that an employee might choose voluntarily to provide priorsalary “as a bargaining chip for higher wages.” McKeown wrote: “Iam concerned about chilling such voluntary discussions. Indeed, theresult may disadvantage rather than advantage women.”

“Wake-up call for all employers”

The management side firm Fisher & Phillips said in ablog post in April that the NinthCircuit's ruling was a “wake-up call for all employers to ensuretheir compensation structures do not unfairly limit the amount ofmoney women earn at their organizations.”

Employers can rely on salary history to screen candidates on thehigh and low ends of the compensation ranges, and the informationcan be a useful tool in crafting attractive offers, said LizWashko, co-chair of the pay equity practice group at OgletreeDeakins Nash Smoak & Stewart.

“One thing employers are struggling with right now is taking acritical look at setting compensation—what information they areusing and how they are using it,” said Washko, a shareholder in theNashville office. “When I'm helping clients with pay equity issues,I can't think of a situation of intentional discrimination. Paydisparities appear to be the result of a systemic issue or lack ofpolicies, or failing to enforce policies.”

She predicted the Supreme Court would take up the Rizocase, noting the split in the circuits take different approaches tothe question. “This is an important time for employers to look athow they are making these decisions,” she said. “It's anopportunity to evaluate that and base compensation on factorsrelevant to the job.”

Several cities and states have banned salary history inquiriesor have proposals pending, including California, Delaware,Massachusetts, Oregon, New Orleans, Philadelphia and New York City.Additionally, numerous pending court cases challenge paydiscrimination on the basis of gender. A judge in Californiarecently said a class action against Googlecould move forward. The complaint cited, among other things, thecompany's use of prior salaries to determine compensation.