Insights
Publications

California to Enact Strongest Equal Pay Law in Nation

9/9/2015 Articles

On August 31, 2015, the California Legislature overwhelmingly passed SB 358, the “Fair Pay Act,” in an effort to close the wage gap that exists between men and women. According to the legislative findings, in 2014 women in California earned an average of 84 cents to every dollar a man earned, a number that decreases significantly for women of color. Supporters are hailing the bill as the toughest equal pay measure in the nation. Governor Jerry Brown’s office has already indicated that he will sign the bill, which will amend Labor Code § 1197.5.

Equal Pay for “Substantially Similar” Work

Under existing law, men and women are already entitled to equal pay for equal work. The Fair Pay Act will expand and clarify the law to make it easier for employees to bring claims for equal pay violations. First, the Act eases the proof standard by requiring that employees of the opposite sex be given equal pay for “substantially similar” work. This allows for comparisons between employees with different job titles who perform similar tasks. Second, the Act clarifies that such equal pay comparisons may be made across different sections of the same company. As an example, the pay for a female hotel room housekeeper might be compared to a male janitor cleaning the lobby.

SB 358 allows employers to differentiate rates of pay among employees performing “substantially similar” work in only four circumstances. Pay may differ pursuant to: (1) a seniority system, (2) a merit system, (3) a system that measures earnings by quantity or quality of production, or (4) a bona fide factor other than sex. The employer has the burden of demonstrating that the bona fide factor is not sex-based, is job related, and is a business necessity. A bona fide factor cannot be shown if the employee demonstrates that an alternative business practice exists to serve the same purpose without creating a difference in wages. The Act also requires that each factor be applied reasonably and that these factors account for the entire wage differential.

This provision is enforceable in actions brought by the Division of Labor Standards Enforcement (DLSE) or by private plaintiffs. Employers may be subject to damages in the form of the wage differential (including interest) and an additional equal amount in liquidated damages, as well as litigation costs and reasonable attorney’s fees. Claims under the Act are subject to a two-year statute of limitations, but willful violations extend the limitations period to three years.

Disclosure of Wages

The Legislature found that the lack of transparency regarding wages and salary payments contributes to the gender wage gap:  women often do not realize that they are being paid less than their male counterparts. To combat this, the Act also strengthens existing law protecting the rights of employees to discuss their wages with coworkers. The Act makes it illegal to discharge, discriminate, or retaliate against an employee for “disclosing the employee’s own wages, discussing the wages of others, inquiring about another employee’s wages, or aiding or encouraging any other employee to exercise his or her rights” under that section. However, the Act does not create any affirmative obligation for employers to disclose employee wages.

The wage disclosure provision may also be enforced by either the DLSE or in a private civil action, but is limited to a one-year statute of limitations. Remedies available under the wage disclosure provision include reinstatement and reimbursement for lost wages and work benefits.

Record Retention

While employers are already obligated to maintain records of employees’ wages, job classifications, and terms of employment, the Act extends the time that the employer must maintain these records from two years to three years.

Employer Action Items

Although it is not yet known when the Fair Pay Act will go into effect, it is recommended that employers take action now to ensure that they are in compliance with these changes. In particular, employers should audit the pay differentials between male and female employees by the type of work they perform. If a difference exists, employers should ensure that it falls into one of the exceptions listed above. If an exception applies, generate and retain proof of the exception and preserve it for three years. Employers should also make appropriate changes to their policies and provide updated training to managers regarding employees’ ability to discuss and inquire into wages. Finally, employers should consult with records and IT to lengthen the retention time of employee documents to three years.

Firm Highlights

Publication

Navigating California Wage Statement Penalties After Naranjo v. Spectrum Security Services, Inc.

On May 6, 2024, the California Supreme Court, in Naranjo v. Spectrum Security Services, Inc. , clarified that an employer is not liable for statutory penalties for inaccurate wage statements when it had a...

Read More
Publication

Navigating Cannabis in the Workplace: A Guide for California Corporations

The landscape surrounding cannabis in the workplace is rapidly evolving, posing challenges for California corporations and businesses to establish effective policies and procedures. As the use of cannabis, both medical and recreational, becomes more...

Read More
Publication

A New Overtime Threshold Takes Effect in Mere Weeks: HR Should Assess Its Impact Now

On April 23, 2024, the U.S. Department of Labor (DOL) issued its final rule increasing the minimum pay requirements under the Fair Labor Standards Act (FLSA) for various exempt “white-collar” employee categories beginning on...

Read More
News

Ex-DraftKings Exec Seeks Fast Trial To Test Noncompete Law

Holly Sutton, chair of Farella's Employment Law Group, provided expert commentary to Law360 for the article "Ex-DraftKings Exec Seeks Fast Trial To Test Noncompete Law." Read the article here (subscription required).

Read More
Publication

Important Changes and the Impact of California Industry-Specific Minimum Wage Laws

In the ever-evolving landscape of California labor laws, the minimum wage has once again taken center stage. With the recent state-wide increase to $16 per hour, the Golden State continues to lead the nation...

Read More
Publication

Navigating California's Evolving Legal Landscape Governing Leaves of Absence

California’s employment laws are no stranger to change, and recent years have witnessed the introduction or modification of various protected leaves by employees. In this article, we will delve into three significant leave categories...

Read More
Publication

The Components of Effective and Defensible Workplace Investigations

Harassment, discrimination and retaliation are serious workplace threats that demand vigilant attention from employers under state and federal laws. This article explores some high-level yet essential components of effective workplace investigations. By understanding the...

Read More
Publication

How to Navigate California Wage Statement Penalties After Naranjo v. Spectrum

On May 6, 2024, the California Supreme Court, in Naranjo v. Spectrum Security Services Inc. , clarified that an employer is not liable for statutory penalties for inaccurate wage statements when it had a...

Read More
Publication

California’s Estrada Decision and Impact on Employers and PAGA Claims

Following Estrada v. Royalty Carpet Mills, Inc. , the California Supreme Court’s employee-friendly Private Attorneys General Act (PAGA) ruling earlier this year, employers must remain more diligent than ever to prevent and mitigate costly...

Read More
Publication

Employment Law Update for Nonprofits With Holly Sutton

Welcome to  EO Radio Show - Your Nonprofit Legal Resource . Charities, foundations, and their founders often request help addressing employment practices and compliance questions. In this episode, host Cynthia Rowland is joined by Holly...

Read More