New Changes to Equal Pay Law in CA

Governor Brown signs new Equal Pay Law

The California Legislature has turned its attention to anti-discrimination law: equal pay. Governor Jerry Brown signed SB 358 into law and becomes effective January 1, 2016. The text of the new law and a summary of the changes in the law already in place is below:

1197.5. (a) An employer shall not pay any of its employees at wage rates less than the rates paid to employees of the opposite sex for substantially similar work, when viewed as a composite of skill, effort, and responsibility, and performed under similar working conditions, except where the employer demonstrates:(1) The wage differential is based upon one or more of the following factors: (A) A seniority system. (B) A merit system. (C) A system that measures earnings by quantity or quality of production. (D) A bona fide factor other than sex, such as education, training, or experience. This factor shall apply only if the employer demonstrates that the factor is not based on or derived from a sex-based differential in compensation, is job related with respect to the position in question, and is consistent with a business necessity. For purposes of this subparagraph, “business necessity” means an overriding legitimate business purpose such that the factor relied upon effectively fulfills the business purpose it is supposed to serve. This defense shall not apply if the employee demonstrates that an alternative business practice exists that would serve the same business purpose without producing the wage differential.(2) Each factor relied upon is applied reasonably.(3) The one or more factors relied upon account for the entire wage differential.

The key changes are:

“substantially similar” work rather than equal work. What does “views as a composite of skill, effort, and responsibility” mean? This will be the subject of litigation.

the employee need not compare herself to others only within the same location, but may look to other job sites. This change likely expands the new law beyond all four laws discussed above. When employers have multiple facilities and pay different rates based on location, this section could result in claims of pay disparity. It is still lawful to do pay geographic differentials as far as I know. But employers will have to ensure that wage differentials based on geography are applied equally and do not create sex-based disparities.

the employer has to prove that wage disparities based on factors “other than sex, such as education, training or experience” are job-related, consistent with business necessity, and that the employee cannot prove a less discriminatory alternative.

the court / jury gets to decide if the employer’s reason for wage disparities are “reasonable.”

the employer must prove the entire wage disparity is due to one or more of the defenses.

Other major changes:

Recordkeeping under this section goes from 2 years to 3.

It is already the law (in the Labor Code, even) that an employer cannot prohibit an employee from disclosing her own wages or discussing wages at work. But this new law prohibits employers from preventing employees from “inquiring about another employee’s wages” or “aiding or encouraging any other employee to exercise his or her rights under this section.” However, the new law says that it does not require anyone, including the employer, to disclose others’ wages. There is no exception for payroll or HR workers who may “discuss the wages of others” under this new law. So, can the payroll manager chat with Sally about Bob’s pay? It also will be interesting to see if this law is preempted by the National Labor Relations Act, which also covers this area.

New private rights of action and remedies for violations. However, these existed in one form or another under the old laws as well.

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