New California Law Changes Equal Pay Playing Field

On Tuesday, October 6, Governor Brown signed into law the California Fair Pay Act, which aims to close California’s 16 cents-per-dollar gender wage gap. The bill is already being touted as “one of the toughest equity laws in the nation.”

The Fair Pay Act takes effect on January 1, 2016, and amends California’s existing Equal Pay Act. Among the most significant elements of the Fair Pay Act is a change in the threshold for a violation. Under the Equal Pay Act, employers were only prohibited from paying different wages for “equal work.” This bar proved both too high and insufficiently definite for employees seeking to enforce the law. Employers were often able to successfully defend wage differences by distinguishing between positions based on minor details. Under the new law, women are entitled to equal wage rates for performing work that is “substantially similar” to that of their male coworkers.

Equally important, the new legislation puts the burden on the employer to demonstrate that any wage discrepancy is based on a legitimate factor. The act retains the same four categories of legitimate factors: a seniority system, a merit system, a system based on production quality or quantity, and any “bona fide factor other than sex” However, the new law clarifies what is meant by a “bona fide factor other than sex.” Under the revised law, the employer must prove that the distinguishing factor is non-sex-based, is applied reasonably, is related to the position in question, and is “consistent with a business necessity.” “Education, training, and experience” are provided as examples of bona fide non-sex-based factors.

Finally, where the Equal Pay Act did not previously provide a cause of action for retaliation if an employee faced an adverse employment action for alleging discrimination in compensation (see Green v. Par Pools, Inc., 111 Cal. App. 4th 620, 633 (2003)), the Fair Pay Act adds such a claim. The new legislation also bars employers from prohibiting employees from discussing their wages amongst themselves or “inquiring about the wages of others.” The law does not go so far as to require employers to respond to inquiries from employees about their coworkers’ pay.

The Fair Pay Act will likely lead to increased litigation activity in the area of gender-based pay discrimination and will make it more difficult for employers to dispose of such claims by way of pre-trial motions. Employers will be wise to jettison the notion that mere differences in title or a small variance in job responsibilities will survive the new “substantially similar” standard, and they will need to be vigilant in documenting their reasons for paying one employee more than another. The law extends the length of time such records must be kept from two years to three.