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What’s New in California’s Fair Pay Act, and How Employers Should Respond

ThinkstockPhotos-188094090Although prohibiting gender-based wage discrimination since 1949, California’s Equal Pay Act (Lab C §1197.5) was rarely used as a basis for litigation because its language made it difficult for an aggrieved plaintiff to establish a successful claim. But now that the legislature has amended it, §1197.5  may become more popular with plaintiffs. And employers get more clarity about what is and isn’t allowed.

Here are the key differences in the amended Equal Pay Act (now called the Fair Pay Act):

  • No more requirement that the jobs compared be at the same establishment. Before its amendment, Lab C §1197.5 prohibited employers from paying less to members of the opposite sex who performed equal work in the same establishment. The “same establishment” requirement has been eliminated. Lab C §1197.5(a).
  • The work need not be “equal”; it must be “substantially similar.” The “equal work” requirement has been revised to instead prohibit paying less for “substantially similar work, when viewed as a composite of skill, effort and responsibility” performed under similar working conditions. Lab C §1197.5(a). Thus, the focus is on job duties, not job titles.
  • The exception for bona fide factors is tougher to prove. A pay differential based on a bona fide factor other than sex must be based on proof that a wage differential isn’t based on or derived from a sex-based differential and is consistent with a “business necessity,” such as a difference in education, training, or experience that is job related to the position in question. And this defense won’t apply if the employee demonstrates an alternative employment practice exists that would serve the same business purpose without producing the wage differential. Lab C §1197.5(a)(1).
  • Anti-retaliation protections extend to those who help employees bring Fair Pay Act claims. It’s always been prohibited to retaliate against an employee who makes a claim under the Act, but now it’s also expressly prohibited to retaliate against those who assist in any manner in the enforcement of the Act. Lab C §1197.5(j)(1).
  • Employers can’t prohibit talk about wages. Advocates for the change in the law contended that secrecy around wages is one of the main reasons pay inequality exists—people don’t know they’re being underpaid. Now, employers may not prohibit an employee from discussing the employee’s own wages, discussing the wages of others, or inquiring about another employee’s wages. Lab C §1197.5(j)(1).

The California Department of Industrial Relations has posted answers to frequently asked questions about the Fair Pay Act and its changes.

In her article for Corporate Counsel, Amber Elias suggests that employers do a pay audit in light of the new law. Specifically, “[e]mployers should first look at their existing system for setting pay ranges and identify the bases for differences between individuals within those ranges, including the type of work performed, experience, education, skill required, level of responsibility and working conditions.”

Employers should then look at “whether there are pay discrepancies between jobs that are nominally different but require similar skill and responsibility.” Employers should consider hiring outside counsel for the audit to ensure that the process is “sound, legally defensible and protected by the attorney-client privilege.”

Ms. Elias also advises employers to look at their existing employee policies on discussing pay and use the “best practice” of giving ranges of compensation and not disclosing the pay of a specific individual, even though California law explicitly states that employers don’t have to disclose wages.

For more on bringing and defending actions under the Fair Pay Act as well as handling discrimination and harassment claims generally turn to CEB’s Advising California Employers and Employees, chap 15.

Other CEBblog posts you may find useful:

© The Regents of the University of California, 2016. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited.

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