A refresher on California equal pay law

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California’s Equal Pay Act is codified at Labor Code Sections 1197.5, 1199, and 1199.5 and extends to wage discrimination based on sex, race, and ethnicity. Labor Code Section 1197.5(a) prohibits employers from paying employees at wage rates less than the rates paid to employees of the opposite sex for substantially similar work, when viewed as a composite of skill, effort, and responsibility, and performed under similar working conditions, except where an employer demonstrates three things:

  1. The wage differential is based upon one or more of the following factors:
    1. A seniority system;
    2. A merit system;
    3. A system that measures earnings by quantity or quality of production;
    4. A bona fide factor other than sex, such as education, training, or experience. This factor applies only if the employer demonstrates that the factor is not based on or derived from a sex-based differential in compensation, is job related with respect to the position in question, and is consistent with a business necessity. For this purpose, “business necessity” means an overriding legitimate business purpose such that the factor relied upon effectively fulfills the business purpose it is supposed to serve.
  2. Each factor relied upon is applied reasonably.
  3. The one or more factors relied upon account for the entire wage differential. The statute provides that prior salary shall not, by itself, justify any disparity in compensation. Under the Equal Pay Act, as amended effective January 1, 2019, an employer may not justify any pay difference between employees of the opposite sex, or employees of different race or ethnicity based on an employee’s prior salary. An employer may make a compensation decision based on a current employee’s existing salary, however, any wage differential resulting from that compensation decision must be justified by one or more of the factors listed.

In making comparisons, California does not limit the analysis to employees in the same establishment or work that is substantially equal. Instead, the standard is “substantially similar work.”

“Substantially similar work” refers to work that is mostly similar in skill, effort, responsibility, and performed under similar working conditions. Skill refers to the experience, ability, education, and training required to perform the job. Effort refers to the amount of physical or mental exertion needed to perform the job. Responsibility refers to the degree of accountability or duties required in performing the job. Working conditions has been interpreted to mean the physical surroundings (temperature, fumes, ventilation) and hazards.

The law also bans employers from prohibiting employees from disclosing their own wages, discussing the wages of others, inquiring about another employee’s wages, or aiding or encouraging any other employee to exercise his or her rights.

Keep records

An employer must keep records of wages, wage rates, job classifications, and other terms and conditions of employment for a period of three years.

Applicant salary history request ban

Effective January 1, 2018, Labor Code section 432.3 prohibits an employer from, either orally or in writing, personally or through an agent, asking any information concerning an applicant’s salary history information, which includes compensation as well as benefits. Furthermore, the law prohibits an employer from relying on an applicant’s salary history information as a factor in determining whether to offer employment at all or in determining what salary to offer. An employer may ask an applicant for his or her salary expectations for the position.

Penalties

 

The Labor Code provides criminal sanctions.

Labor Code Section 1199.5 provides that employers or individuals who willfully violate the state law are potentially subject to misdemeanor sanctions, including fines of up to $10,000, imprisonment for up to six months, or both. A person is not subject to imprisonment, however, unless he or she has been convicted of a prior offense pursuant to Section 1199.5

The Labor Code also provides civil remedies.

Labor Code Section 1197.5(b) authorizes recovery of (1) the amount of wages of which an employee is deprived due to the violation; (2) interest on such amount, (3) plus an additional sum equal to the total of (1) and (2) above as “liquidated damages.” The costs of suit and reasonable attorney’s fees are also recoverable. Employers that want to be proactive about their compliance with the Equal Pay Act can start by evaluating the jobs that are substantially similar and assessing whether the protected categories who perform those jobs are paid the same. The Labor and Employment group at Scali Rasmussen can assist employers with conducting an internal compliance audit. Please contact our office for more information.