Strict New California Fair Pay Act Increases Requirements for Wage Equality and Transparency

On January first of this year, The California Fair Pay Act (Senate Bill 358) went in to effect. Signed in to law by Governor Jerry Brown last October, amending Section 1197.5 of the Labor Code relating to private employment, and building on the California Equal Pay Act of 1949, giving employees the right to equal pay for equal work, this new law promises to be one of the toughest in the nation.

In 2014, the gender wage gap in California stood at 16 cents on the dollar, meaning that women working full time earned an average of 84 cents to every dollar earned by their male counterparts. While the state's overall wage gap is slightly lower than the national average of 78 cents to the dollar, the disparity in earnings still has a significant impact on the economic security and welfare of millions of working women, who make up almost half of the U.S. labor force and are increasingly becoming the sole source of support for their families.

"Substantially Similar" Work

Under the new Fair Pay Act, an employer is prohibited from paying employees of the opposite sex lower wages for "substantially similar work, when viewed as a composite of skill, effort and responsibility, and performed under similar working conditions." Previously, the Equal Pay Statute was limited to prohibiting employers from paying employees of the opposite sex in the same establishment different wages for equal work. An example of substantially similar work, as offered by State Senator Hannah-Beth Jackson, who authored the bill, is a female housekeeper who cleans hotel rooms at one location may challenge the higher wages paid to male janitors who clean the lobby and banquet halls at another location. Another example might be comparing female-dominated secretarial jobs against male-dominated IT technician jobs. The new bill expands protection by allowing comparisons between different fruits (apples to oranges) and not just identical types of fruits (apples to apples).

Improved Wage Transparency

Additionally, the Fair Pay Act "prohibits employers from retaliating against employees who disclose their own wages, discuss the wages of others, inquire about another employee's wages, or aid or encourage another employee to exercise his or her rights under the new law." The new law does not require employers to disclose the wages of other employees to inquiring employees.

Increased Recordkeeping Requirements

The new bill also "increases employee recordkeeping requirements regarding wage rates, job classifications and other terms of employment from two years to three."

Burden of Proof Shifted from Employee to Employer

The law does not mandate that employers pay everyone the same for substantially similar work. It does, however, shift the burden to employers to prove that any and all discrepancies between wages paid to different genders is based on a reasonable application of one or more of the following factors:

  • A seniority system
  • A merit system
  • A system that measures earnings by quantity or quality of production; or
  • A bona fide factor other than sex, such as education, training, or experience.

(This last point can be challenged if the employee can demonstrate that an "alternative business practice" exists that would work equally well without producing a wage differential.)

Employer Liability

Any employer who violates the California Fair Pay Act could be liable for "an employee's lost wages with interest, an additional equal amount as liquidated damages, costs for bringing a civil suit, and attorney's fees." SB 358 also prohibits employers from retaliating against employees for exercising their rights under the California Fair Pay Act.

Action Items

If an employee believes that they being paid less than a co-worker of the opposite sex for substantially similar work, he or she should consult an attorney for more information about this important new law.