Despite continued progress toward gender equality in the workplace, a significant earning gap between women and men still exists. Women’s median earnings are lower than men’s in nearly all occupations. In 2014, women working full time in the United States were paid on average just 79 percent of what men were paid. Women comprise almost half of the U.S. labor force and are increasingly becoming the sole source of support in their families.
On January 1, 2016, California’s Fair Pay Act will go into effect. The Act amends Section 1197.5 of the California Labor Code relating to private employment. This bill builds on the California Equal Pay Act of 1949, which has been interpreted by courts as giving employees the right to equal pay for equal work. Under the new Fair Pay Act, an employer is prohibited from paying employees of the opposite sex lower wages rates for “substantially similar work, when viewed as a composite of skill, effort, and responsibility, and performed under similar working conditions.” Previously, the equal pay statute was more limited. It prohibited employers from paying employees of the opposite sex in the same establishments for equal work. The new standard permits an employee to bring an unequal pay claim based on employee wage rates in any of their employer’s facilities and in other job categories as long as the work is substantially similar.
In 2010, nearly half of all workers nationally reported that they were either contractually forbidden or strongly discouraged from discussing their pay with their colleagues. Under the Fair Pay Act, employers are prohibited from retaliating against an employee for investigated or disclosing wage gaps.
SUBSTANTIALLY SIMILAR WORK
The Fair Pay Act prohibits an employer from paying any of its employees at wage rates less than those paid to employees of the opposite sex for substantially similar work. Pay discrimination means that you are doing essentially the same work as a male co-worker, but you are receiving less money for it. This can be true even if you and the co-worker have different job titles or qualifications, as long as the actual work being performed is substantially the same. For example, a hotel maid can now compare her salary to that of a janitor who cleans conference rooms.
This cause of action must be brought within 2 years of when the incident occurs, unless it is a “willful violation,” which is when the employer knowingly violates the law. Willful violations of this Section may be brought up to three years after the cause of action occurs.
The Fair Pay Act eliminates the requirement that the wage differential be within the same establishment. Instead, employees can bring equal pay claims irrespective of their work location. Workers at the same company can now investigate what their counterparts make in another office location. The Fair Pay Act requires equal pay for work “of comparable character,” which allows for comparison across locations and even official job titles, as long as the job duties are similar. For example, a female employee of a company working in Los Angeles can compare her salary to a male employee who works for the same company in the same or similar position in San Diego.
EMPLOYER MUST JUSTIFY THE WAGE GAP
Under the Fair Pay Act, employers must affirmatively demonstrate that a wage differential is based upon one or more specified factors, including 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. A bona fide factor other than sex, such as education, training, or experience “shall apply 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.” A “business necessity” is defined as “an overriding legitimate business purpose such that the factor relied upon effectively fulfills the business purpose it is supposed to serve.” However, the employee’s claim may still prevails if he/she can show that an alternative business practice exists that would serve the same business purpose without producing the wage differential.
If there is a wage disparity, the employer must be able to articulate what factors other than sex account for the entire differential; the employer would need to demonstrate that the factors that explain the pay differential are gender neutral, job related, and consistent with business necessity; that the employer applied those factors reasonably; and that those factors are consistent with business necessity. These are, however, objective measures and an employer that relies on any one or more of these factors to justify gender pay differences must be ready to explain how each factor contributes to the outcomes.
REASONABLE APPLICATION STANDARD
Under the Fair Pay Act Section 1197.5.(a)(2), each articulated legitimate, non-gender related reason for a pay differential must be applied “reasonably” and must account for the entire wage differential in pay.
Under the Fair Pay Act Section 1197.5 (j)(1), an employer “shall not discharge, or in any manner discriminate or retaliate against, any employee by reason of any action taken by the employee to invoke or assist in any manner the enforcement of this section.” The Act also seeks to decrease pay secrecy by further prohibiting employers from enacting rules, policies or otherwise engaging in conduct that prohibits employees from disclosing their own wages, discussing the wages of others, asking about other employees’ wages or aiding and encouraging employees to exercise rights under the Act. They can also inquire about those in positions that closely resemble theirs in responsibility. However, nothing in this section creates an obligation to disclose wages. An employee has one year to bring this cause of action.
WHAT IS INCLUDED IN WAGES?
Wages include all payments made to or on behalf of the employee as compensation for employment. In line with the Fair Labor Standards Act, the Equal Protection Act recognizes non-monetary forms of compensation as wages only if they are not for the sole benefit of the employer. For example, uniforms paid for and provided to the employee by the employer are considered non-monetary items for the employer’s benefit and would not constitute wages.
EMPLOYER RECORD KEEPING REQUIREMENT
The Fair Pay Act requires employers to maintain records of employees’ “wages and rates of pay, job classifications, and other terms and conditions of employment” for a three-year period.
BRINGING A CLAIM
Employees have two years to pursue an equal pay claim (three years for willful violations) and may do so in court or by filing a complaint with the Division of Labor Standards Enforcement (hereinafter called the Division) of the State of California Department of Industrial Relations. Once a complaint has been filed, the Division will investigate the claim. If a claim is found to be valid, the Division reserves the right to initiate all necessary proceedings to collect any wages and damages due, including the right to bring a civil lawsuit on behalf of an employee.
In a civil lawsuit, an individual may collect lost wages, damages in the amount equal to their lost wages, the costs of bringing the suit and reasonable attorney’s fees. Employees may recover reinstatement and reimbursement for lost wages and work benefits caused by the acts of the employer, including interest thereon, as well as appropriate equitable relief.