The New California Equal Pay Law: Toughest in The Nation

The New California Equal Pay Law: Toughest in The Nation

The California State Senate recently approved S.B. 358, which amends California’s Fair Pay Act to significantly expand protections against gender wage inequality.  Governor Jerry Brown has stated that he plans to sign the bill into law, which would take effect on January 1, 2016.

Current California law and the federal Equal Pay Act require equal pay for “equal” work.  The new law expands this by imposing a looser standard.  It requires equal pay for “substantially similar work.” Based on how it is drafted, the new law appears to enable employees to show a wage disparity if they’re paid less than someone of the opposite sex in a similar (as opposed to identical)position.

Employers must justify any difference in pay

Under the new law, an employer may not pay an employee less than what it pays an employee of the opposite sex for “substantially similar” work, unless the employer can justify the difference based on the following factors:

(1) Seniority;
(2) a Merit system; or
(3) Sales commissions or similar payments based on production.

An employer may also cite an alternate factor, such as differences in education, training, or experience to justify a difference in pay, if it can also demonstrate that the factor is related for the position in question and is consistent with a “business necessity.”

In this context, a “business necessity” is an “overriding legitimate business purpose,” which does not apply if the employee can demonstrate that there is an alternative business practice that would serve the same business purpose without producing the wage differential. The employer must also show that it reasonably applied any factors relied upon and that those factors account for the entire wage differential.

Private Right of Action
Consistent with the provisions of the previous law, the new amendment allows employees to sue their employer based on a claimed violation.  If successful, an employee can recover the balance of wages due, liquidated damages equal to the wages due, interest, costs, and attorneys’ fees.

The new law adds an anti-retaliation provision, which protects employees who attempt to enforce their own rights or encourage others to do so, or who disclose their own wages, discuss the wages of others or inquire about another employee’s wages.

Record Keeping
The law also increases record-keeping requirements from two to three years.

Multiple Locations
Current California and federal law only allow for a wage differential at a single location.  Under the new law, when asserting equal pay claims, California employees can compare their wages to employees of the same employer working at other locations in the state.

Burden of Proof
The new law places the burden of proof on the employer to demonstrate that any wage differential is not gender-based.

What You Should Do
Compliance with the new law will prove especially challenging for employers.  In many cases, employers base their decision on how much to pay a new employee on a combination of factors, including  education, experience, and their prior salary, along with their interviewing and negotiating skills.

In response to these changes in law, California employers (especially those with multiple locations) should immediately conduct an audit of their payment practices in order to detect and address any potential wage disparities that could be associated with gender.

Author: Seth Heyman
Seth D. Heyman is a California attorney with extensive experience in advertising and marketing law, corporate law, contracts, governmental regulations, international business, and Internet law. He has counseled numerous successful companies, both public and private, and was responsible for regulatory compliance, contract management, corporate governance, and HR best practices for multiple organizations in many diverse industries, including marketing, telecommunications, energy, and technology development. He offers insight and guidance on federal and state direct mail, TV, radio, telemarketing, and Internet marketing laws, as well as online promotions, Internet privacy, data protection regulations, and similar matters.
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