California’s Fair Pay Act prohibits wage gaps based on gender and encourages wage rate transparency

With the passage of the 2015 Fair Pay Act (SB 358), California now boasts the strongest protections for equal pay in the nation.  Starting January 1, 2016, employers must pay men and women the same for “substantially similar work”—not just for “equal work,” or the same “job.”   Workers at the same company will now be free to investigate what their coworkers make in another office location.  Employees can also look at positions closely resembling theirs in responsibility.  For example, a female hotel room cleaner can now compare her salary to that of a male janitor who cleans conference rooms.

Under many circumstances, an employer may still pay its female and male workers different rates and not violate this law.  For instance, employers may pay employees different rates so long as that difference is based upon seniority, merit, quality, or quantity of production. 

In addition, employers may also pay different rates to members of the opposite sex if the employer identifies some other “bona fide” basis for the difference, such as education, training, or experience.  However, if an employer claims that the pay differential is based on something other than seniority, merit, quality or quantity of production, then the employer must affirmatively show three things: (1) the pay gap is not due to sex-based reasons; (2) the pay gap is job related to the position in question; and (3) the pay gap is consistent with a business necessity.  The term “business necessity” means an “overriding legitimate business purpose” that “effectively fulfills the business purpose it is supposed to serve.”  Although California Courts have not yet tested this law, it appears that employers will face a tough burden in meeting this three-part standard.  Even if an employer is able to show that the pay difference is attributable to “business necessity,” an affected employee may still win the case if she is able to show that an alternative business practice exists that would serve the same business purpose without producing the pay gap.

Violations of this law are treated very seriously.   A prevailing employee will receive the amount of the difference in wages lost as a result of the pay gap, plus liquidated damages in an equal amount (i.e. the employee will receive the wages lost multiplied by two), plus interest.  The aggrieved employee may also receive attorney fees.

Finally, the 2015 Fair Pay Act also affirms that employers cannot prohibit employees from disclosing their own wages or wage rates, discussing the wages of others, inquiring about another employee’s wages, or aiding or encouraging any other employee to exercise his or her rights.  Note, these are rights already provided and protected under the National Labor Relations Act to all employees, whether or not represented by a Union; California’s new law reinforces this important concept.  Employers often prefer workers not to share and compare wage rates because workers may be more likely to speak out against inequities if they gain such knowledge. 

For more information related to California’s Fair Pay Act, contact your labor law counsel. 

By Michael Burstein | October 26, 2015

Legal Developments