New California Law Aims to Bridge Gender Wage Inequity Gap

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Last week Governor Jerry Brown signed a law intended to increase wage transparency and is aimed at making it more difficult for an employer to defend against an equal pay claim. The California Fair Pay Act (FPA) amends the state’s Equal Pay Act and prohibits an employer from paying employees of one sex lower wages than employees of another sex “for substantially similar work, when viewed as a composite of skill, effort, and responsibility, and performed under similar working conditions.”

The FPA extends the employers’ obligation to maintain records of wages and wage rates, job classifications, and other terms of employment from two years to three. It also includes a provision that expressly prohibits employers from discharging, discriminating against, or retaliating against employees who disclose their own wages, discuss others’ wages, or aid or encourage other employees to invoke their rights to fair pay under the law.

The FPA borrows significantly from the federal Paycheck Fairness Act, a bill that has been languishing in Congress for the past several years. It substantially relaxes the evidentiary burden of proof on employees complaining of unequal pay based on their gender. Before the amendment, an employee had to demonstrate he or she was not being paid at the same rate as someone of the opposite sex at the same establishment for equal work. Under the new law, the requirement of the same establishment has been eliminated, and the employee need only show that he or she is not being paid at the same rate for substantially similar work.

There are some exceptions available to employers in defense of claimed discrepancies in pay between the sexes. Employers can escape liability if they can affirmatively demonstrate the difference in pay is based upon: 1) a seniority system; 2) a merit system; 3) a system that can measure earning by quality of quantity of production; or 4) some other bona fide factor other than sex, such as training, education, or experience.

The new law does contain a small nod to employers in that it does not require them to disclose wages.

The FPA takes effect on January 1, 2016. In preparation, employers should review all compensation-related policies to ensure all additional requirements under the new law are met; review and audit employees’ job descriptions and current salaries to ensure any pay differentials are completely accounted for; train anyone who makes compensation-based decisions on the amended requirements and on what factors compensation decisions can be based; confirm there is a sufficient internal complaint procedure to address any wage differential issues that may arise; and review record retention policies to comply with the updated three year rule.

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Posted In: Legal