California leading equal pay changes sweeping the U.S.

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New pay equity legislation in California effective at the beginning of this year is just the tip of the iceberg in a wave of laws sweeping the country that make it easier for employees to obtain redress for gender-based wage discrimination.

California’s amendments to Section 1197.5 of the California Labor Code in the Fair Pay Act may be the nation’s most uncompromising effort to date to end salary disparities between the sexes. Statistics referred to in the legislation suggest that California women earn 84 cents on average for every dollar earned by men.

“The changes apply to all employees in California, so anyone who works in the state regardless of where the employer is located is protected under the Fair Pay Act,” says James R. Evans Jr., a partner in the Los Angeles office of national law firm Alston & Bird LLP. “There are no exemptions for small businesses or startups.”
The legislation amends the Equal Pay Act (passed in 1949 and last amended in 1985) in three main ways:

  • Employees may be compared to co-workers, regardless of where they are employed in the state. Formerly, claims were limited to pay differentials between employees working within the same facility.
  • Employers will now have to equalize pay for employees who do “substantially similar work.” Previously comparisons could only be made based on job titles with specific job restrictions and responsibilities.
  • The onus has been shifted to employers to justify pay differentials, based on specific stated factors, including a seniority or merit system; piece work or commission-based pay; and other bona fide factors not including sex such as skills, education, training, shift or geography.

Evans says another notable aspect of the California statute is that employer policies prohibiting discussions among employees about their pay or preventing them from asking questions about how their pay relates to that of others in the company are now unlawful. “These changes are intended to facilitate open conversations among employees so they can assess whether they are being paid differently based on gender,” he says.

California employees who believe they have been fired, discriminated or retaliated against for engaging in any conduct protected by the statute have two ways of seeking redress. They may file complaints with the California Division of Labor Standards Enforcement alleging employer violations; or, within one year of when the alleged contravention occurred, they can sue their employer privately for damages.

“We expect that there will be a very significant number of employee claims filed in the coming year."

“Probably the best way for employees to raise these concerns is to first try and use internal HR policies within the organization to resolve the matter informally,” Evans says. “However if that doesn’t work, I think a DLSE claim is the fastest way to get individual resolution, as opposed to a class action which tends to be more lawyer-driven.”

Damages awarded against employers may include the retroactive pay differential between the wages paid and wages the employee ought to have received plus interest. There may also be additional penalties imposed against the employer.

Other states
A publication from Seyfarth Shaw’s Pay Equity group summarizes other similar groundbreaking changes to pay equity laws U.S. employers should be aware of. They include new laws in New York, Massachusetts, Nebraska, New Jersey and Maryland.

The document also notes that as the equal pay trend escalates, more pay equity data may soon be required from employers due to the Equal Employment Opportunity Commission’s February proposal to expand annual EEO-1 reports, which the EEOC claims would “assist the agency in identifying possible pay discrimination and assist employers in promoting equal pay in their workplaces.”

Nevertheless, California’s pay equity changes are the most aggressive. For example, like in California, when pursuing gender-based compensation claims, New York employees can look to comparable situations at other employer locations. However, the New York law stipulates that comparators must work in the same “geographic region no larger than the same county,” while comparisons can be made between salaries of California employees anywhere in the state.

Evans is advising his employer-clients to take a proactive approach instead of waiting until employees file a DLSE claim or a lawsuit. The first step is to review gender pay data for similar job classifications.

“Let’s say the employer has retail associates. I’ll look at them statewide and have the employer gather data about the number of men and women in those different jobs plus the pay ranges based on gender,” he says. “Then I’ll drill down further to look at substantially similar jobs to make sure we capture everyone. I use a statistician to help me crunch the numbers and identify any red flags.”

However, he acknowledges that the process could be very onerous for some employers, and they will need further interpretation from both courts and the regulators to make intelligent decisions about which jobs are “substantially similar.”

“We expect that there will be a very significant number of employee claims filed in the coming year,” he says.

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Equal pay Equal Pay Act Compensation Gender discrimination EEOC