California’s Fair Pay Act – What Employers Need to Know

The nation’s strongest equal pay law recently went into effect in California on January 1, 2016. Signed into law by Governor Jerry Brown last October, California’s Fair Pay Act strengthens existing equal pay laws and gives workers new protections and remedies. California employers should take some time to acquaint themselves with the new law’s requirements.

Equal Pay for Substantially Similar Work

California’s existing equal pay law required “equal pay for equal work” for those working in the “same establishment.” Over the years, “equal work” has been interpreted to mean equal pay for those employees with the same job title working in the same establishment. The result? A female worker could do essentially the same work as a male counterpart and yet be paid less if their job titles or work locations were different.

The new law changes the words “equal work” to “substantially similar work” and disposes of the “same establishment” requirement. As a result of these changes, equal pay is now required for any substantially similar work, regardless of where employees work. Therefore, employers should be prepared to pay its male and female employees equally for similar work.

If there is a difference in pay, the new law places the burden on the employer to demonstrate that the wage differential is based upon 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. The employer must show that the difference in pay is attributable to factors that are gender neutral, job related, and consistent with a business necessity.

Sharing Wage Information with Employees

The new law also forbids an employer from prohibiting its employees from discussing each other’s compensation or from inquiring about another employee’s wages. Therefore, confidentiality provisions in employee compensation agreements should be removed, as should any company policies prohibiting employees from discussing their pay with each other. In addition, company management should be ready for some awkward conversations in the workplace, although the new law does state that nothing in the law “creates an obligation to disclose wages.”

Employee Remedies

The Fair Pay Act gives employees stronger remedies to challenge violations. Employees can sue in court and recover double back pay with interest, as well as attorney’s fees and costs.

Conclusion 

In light of California’s new Fair Pay Act, California employers should take a close look at how their salaries line up along gender lines among those who are performing similar work. It’s also a good idea to consult with a lawyer to help navigate the new law’s requirements.