California Fair Pay Act Touts Strongest Equal-Pay Protection in Nation

By Employment Lawyers Timothy Broderick and Katrina Saleen

The California Fair Pay Act, which became effective January 1, 2016, touts the strongest equal-pay protection in the nation. The Act attempts to address long standing gender pay disparity. According to statistics relied upon by the California Legislature in passing the act, in 2014, a woman working full-time earned 84 percent of what a man earned.

It has been illegal to pay women less than men for the same work since 1949, through Labor Code Section 1197.5. However, enforcing the equal pay for equal work law has proven difficult. The Fair Pay Act amends Labor Code section 1197.5 in several key ways.

First, the old law limited wage disparity claims to employees at the same establishment performing equal work. The new Act mandates equal pay for “substantially similar work, when viewed as a composite of skill, effort, and responsibility, and performed under similar working conditions.” Under this revision, men and women are entitled to equal pay if they perform comparable work, even if they have different job titles or work in different offices at the company.

There are four exemptions to the equal pay rule, (1) a seniority system, (2) a merit system, (3) a system that measures earnings by quantity or quality, and (4) a bona fide factor other than sex, such as education, training, or experience.

The Fair Pay Act changes the burden of proof for employers and employees in relation to the exemptions. First, the Act now states that any factor that the employer relied upon for justification of the pay disparity must be “applied reasonably.” Next, the Act states that any factor relied upon by the employer must “account for the entire wage differential” placing the burden on the employer to link the entire wage differential to the gender pay gap justification. Third, the Act restricts the catch-all exemption for any bona fide factor other than sex by placing the burden on employers to show that the bona fide factor defense is (1) not derived from a sex-based differential in compensation, (2) is job-related, and (3) is consistent with business necessity. Importantly, in addition, the Act allows employees to overcome an employer’s bona fide factor exemption if the employee can show that there is an alternate business practice that would serve the same business purpose without creating the gender pay gap.

In addition, the amendments make it unlawful to discharge, discriminate or retaliate against an employee who takes action to assist in the enforcement of the Equal Pay Act, and those that are retaliated against or discriminated against have a private right of action.

Pay secrecy has also been addressed. The Act makes it unlawful for an employer to prohibit an employee from disclosing their own wages or inquiring about others’ wages. While the law does not obligate people to disclose their wages to others, it is now unlawful to prevent employees from taking efforts to find out of there is a gender pay gap.