HR Management & Compliance

California getting tough law on gender wage gap

Employers in California will have to comply with what’s being called the strongest equal pay law in the nation when it takes effect on January 1, 2016.

Governor Edmund G. Brown, Jr., signed the California Fair Pay Act, Senate Bill 358, on October 6. A statement from the governor’s office says current law prohibits employers from paying a woman less than a man when they both perform equal work at the same establishment, but the new law will require equal pay regardless of gender for “substantially similar work.” The new law also will prohibit retaliation against employees who invoke the law and will protect employees who discuss wages.

The new law differs from current law in two key ways, according to Mark I. Schickman, an attorney with Freeland Cooper & Foreman LLP in San Francisco. First, it requires employers to understand not only what the “same job” is but also what “comparable jobs” are. “That’s very different,” Schickman said. Plus, the law doesn’t provide employers guidance on how to figure that out. The second key difference is that the new law puts the burden of proof on the employer to justify differences in wages.

Under the new law, “employers have to do analyses they’ve never had to do before,” Schickman said. He gave the example of a paralegal, a litigation associate, and a secretary. “Are they substantially similar work?” he asked. The skills are different, but if it’s determined that those jobs are substantially similar, the employees will have to have the same pay.

Schickman says employers have many reasons for pay differences that aren’t related to gender. “Now employers really have got to audit their rosters, and if there is a discrepancy, identify what the reason for it is,” he said. An employer may find that an employee who started work in one year may have gotten paid less than a worker starting at a different time because of market differences.

“That may not be fair, but it may not be gender discrimination,” Schickman said. “If the employer can’t justify the difference, [it’s] in trouble.”

Cathleen S. Yonahara, also an attorney with Freeland Cooper & Foreman, pointed out that California’s current equal pay law and the federal Equal Pay Act require equal pay for employees in the “same establishment.” The new law eliminates that requirement. “Accordingly, any pay differential between male and female employees will be examined with regard to the business enterprise as a whole rather than just a single physical location,” she said.

Also, “employers will face a much higher hurdle in establishing that a pay differential was properly based on a bona fide factor other than sex,” Yonahara said. The new law narrowly interprets a currently available defense that a pay differential is based on a “bona fide factor other than sex.”

Under the new law, that defense won’t be available unless the employer demonstrates that the factor is (1) not based or derived from a sex-based differential in compensation, (2) job-related with respect to the position in question, and (3) consistent with business necessity, Yonahara said, adding that the defense won’t apply if an employee demonstrates that there is an alternative business practice that serves the same business purposes without producing a wage differential.

In passing the new law, the legislature made clear that it believed pay secrecy was contributing to the gender wage gap because women cannot challenge wage discrimination that they do not know exists, Yonahara said. Therefore, the new law prohibits discrimination or retaliation against employees who inquire about other employees’ wages, discuss the wages of others, or disclose their own wages.

The law does clarify, however, that it doesn’t create an obligation to disclose wages. “Indeed, an employer would face potential liability for invasion of privacy if it disclosed the wages of other employees,” Yonahara said.

The new law likely will result in more lawsuits being filed, Yonahara said. Therefore, she advises employers to conduct an internal audit to ensure compliance. Employers should carefully review the wages paid to employees throughout their organization and be certain that men and women who perform substantially similar work are being paid the same.

For more information on the new law, see upcoming issues of California Employment Law Letter.