California Equal Pay Law Strengthened
The governor signed the Fair Pay Act, SB-358 Conditions of employment: gender wage differential this month. It amends Labor Code section 1197.5 to strengthen protection against retaliation for employees who inquire about pay or share their own pay. It also requires employers to demonstrate that wage differences between male and female employees who perform substantially similar work are due to factors, such as a senority system, a merit system, and quantity or quality of production according to a system that measures compensation according to such factors. An employer can argue as a defense that a wage differential is due to a bona fide factor other than sex, such as education, training or experience, if it 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. "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. The employee can defeat this defense by demonstrating that an alternative business practice exists that would serve the same business purpose without producing the wage differential.
In addition, the employer must demonstrate that each factor it relies upon is applied reasonably and that those factors account for the entire wage differential.
These express factors are meant to remedy a previously vague standard that employers could easily overcome with any excuse for a differential. Further, the term is meant to require a higher standard than the overly broad "acceptable business reason." At the same time, these new prongs provide more guidance in that they explicitly state what an employer must demonstrate in order to justify a wage disparity for substantially similar work.
These changes are aimed at eliminating a gender gap of 16 cents on average that California women made less than California men per dollar in 2014. By providing express protections against retaliation for exercising their rights under the Act, the hope is that women will actually know their rights regarding inquiring about wages to determine if they are being paid equally.
The governor aptly signed the bill into law at the Rosie the Riveter National Monument in Richmond, California.