October 6, 2015

California To Enact Broad “Fair Pay” Law Today

In an effort to close the wage gap between working men and women, the California legislature recently passed Senate Bill 358 (the “Fair Pay Act”) to amend California’s current equal pay law.  Governor Jerry Brown is expected to sign the bill today, and the amended law will take effect on January 1, 2016.  Public and private employers should take note of the amended law’s most significant changes, which are as follows:

Substantially Similar Work

Current law requires employers to pay men and women equal pay for “equal work.”  The amended law broadens that coverage, requiring that employees of opposite sex must receive equal pay for “substantially similar work, when viewed as a composite of skill, effort, and responsibility, and performed under similar working conditions.”  This change allows employees to file claims based upon wage differences between employees of the opposite sex who are in similar job positions, whether or not the positions are identical or similarly titled.

Location of Comparators

Before amendment, the law prohibited differential pay between employees of the opposite sex only if they worked at the same establishment.  Under the amended law, employers will be prohibited from paying any employee a lower wage rate than that of an employee of the opposite sex performing substantially similar work regardless of location.  An employee will consequently be able to file a claim challenging his or her pay based on the wages of workers at an employer’s other sites.

The Employer’s Affirmative Burden

The amended law also shifts the burden onto employers to affirmatively demonstrate that a wage differential between employees is not sex-based.  To defend against a claim under the equal pay law, employers will be required to show that a wage differential is based upon one or more factors, including a seniority system, a merit system, a system that measures earnings by quantity or quality of production, or another factor other than sex, such as education, training or experience.  Employers will also be required to show that any factor(s) upon which a wage differential is based were applied reasonably and account for the entire differential.

Disclosure, Retaliation and Discrimination 

The new law bars employers from prohibiting employees from discussing their own or others’ wages,  inquiring about another employee’s wages or encouraging others to exercise their rights under the equal pay law.  In addition, it prohibits employers from retaliating or discriminating against an employee for pursuing a claim under the amended law or otherwise assisting in the law’s enforcement.

Maintaining Records

Originally, the law required employers to maintain records of wages and wage rates, job classifications and other terms and conditions of employment for a minimum of two years.  Once the new law takes effect in 2016, these same records must be kept on file for a minimum of three years.

To be sure, this law imposes significant obligations on employers, not to mention providing fertile ground for future litigation. California employers would be well-advised to review their pay structures to ensure compliance with this new law.

Category: Equal Pay,