California Employers: Prepare Now for Changes Resulting from New Fair Pay Act

By Charles O. Thompson & Garrett Parks 

On August 31, 2015, the California Senate unanimously passed (39-0) Senate Bill 358, the California Fair Pay Act (CFPA), and sent the bill to the desk of Governor Jerry Brown, who intends to sign it into law.  The purpose of the CFPA is to strengthen the 1949 California Equal Pay Act by closing gaps in the existing law, which have resulted in a significant differential in pay for women as opposed to men. As of 2013 in California, women made only 84 cents for every dollar earned by a man. 

The CFPA substantially broadens and strengthens protections for women in the workforce.  The bill’s primary provision calls for women to be paid the same as men for “substantially similar work” rather than the “same” job, subject to a few limited exceptions.  Now, employers (and courts) will be required to look more critically at factors such as the similarities in skill, responsibility, and effort required to perform a job when determining whether men and women should be paid the same when engaged in similar jobs.   Other changes to the law include increasing recording keeping requirements from two to three years and adding an anti-retaliation provision to protect employees who inquire about how much their co-workers earn.  Importantly, the CFPA also does away with the same location requirement.

Specific Amendments to Law
The CFPA amends a number of sections of the 1949 Act, California Labor Code section 1197.5, which generally attempts to prohibit employers from paying women less than men to do the same job.  Over the past several decades, ambiguities in section 1197.5 have been relied on to justify different pay for men and women who performed substantially similar, if not identical, jobs.  For example, section 1197.5 applies only to individuals working “in the same establishment,” which means that women working at a company’s Sacramento facility is not able to compare her pay to a man working in the same job at the company’s Long Beach location.   Section 1197.5 also does not expressly prohibit retaliation against employees who ask how much money other employees make.  This has prevented many women from learning whether they are being paid comparably to men holding the same job.

Critical to getting employer (and employer-friendly legislators) support was retaining a form of the “business necessity” exception.  This provision provides employers necessary flexibility, enabling them to adjust pay for men and women when the specific nature of a particular job has requirements that differ for men and women.  Employers are likewise still permitted to differentiate pay based on seniority and merit.  However, they must evaluate employees performing substantially similar work in a nondiscriminatory way and maintain gender-neutral metrics to determine merit, productivity, and other bonuses.  Gone is the former ambiguous “bona fide factor other than sex” justification to pay different wages.  It has been replaced by a number of specific affirmative defenses that employers must meet in order to justify different pay.

Moving Forward
Because California has had gender pay protections since 1949, many employers have already taken steps to ensure that male and female employees are compensated equally for the same work.  The CFPA does, however, broaden and expand same-pay protections to employees in a range of differently titled jobs provided the duties they perform are substantially similar to other jobs.  This means that employers will need to do diligence and confirm, or update, their current policies and practices.

  • Wage Audits: Employers should review job descriptions and audit wages paid to male and female employees with “substantially similar” jobs, as determined through a review of job descriptions, to ensure that all employees with similar responsibilities are being compensated equally.

  • Handbooks: Employers should update employee handbooks with an appropriate non-discrimination provision relating to wages and include language that informs employees that they will not be retaliated against for inquiring about wages paid to them or other employees.

  • Retention Policies: Records retention policies should be updated to reflect a three year hold on pay-related records for employees.

  • HR Training: Training should occur for all decision makers, particularly for those who make hiring decisions, to inform and educate them as to the details of these amendments.

A copy of the legislation is available here.  Polsinelli’s Labor & Employment practice will report on additional updates after this law goes into effect. For more information on how these amendments may impact your business, please contact the authors or your Polsinelli attorney.