California’s Equal Pay laws may become the strictest in the United States. Senate Bill 358 arrived on the Governor’s desk on September 1, 2015 for his consideration. If the Governor signs the bill, and he is expected to do so, it will expand California’s gender pay differential law
starting January 1, 2016.

The Federal Equal Pay Act (29 U.S.C. § 206(d)) and California’s own gender pay equality law (Labor Code section 1197.5) have been in place for many years. Senate Bill 358 seeks to close perceived “loopholes” that make it difficult to prove a claim.

Current law prohibits an employer from paying an employee less than employees of the opposite sex who perform the same job, requiring the same skill, effort, and responsibility, in the same establishment, under similar working conditions.

Payments made pursuant to systems based on seniority, merit, or that measure earnings by quantity or quality of production; or differentials based on any bona fide factor other than sex, are exempt from this prohibition. The Senate Bill would remove the requirement that the pay differential be within the same “establishment,” and would modify the “equal” and “same” job, skill, effort, and responsibility standard. Violation would then require only a showing of “substantially similar work, when viewed as a composite of skill, effort, and responsibility, and performed under similar working conditions.” This would require plaintiff employee to compare herself with men working at any location for the same employer, and in any similar (not the necessarily the same) job.

The Senate Bill also requires employers to affirmatively demonstrate that the wage differential is based entirely and reasonably upon one or more factors. It seeks to add to the three existing systembased factors (seniority, merit, or production-based) a “bona fide factor”: a factor that is not based on or derived from a sex-based differential in compensation, that is related to the position in question, and that is consistent with a “business necessity” (defined as “an overriding legitimate business purpose such that the factor relied upon effectively fulfills the business purpose it is supposed to serve”). The “bona fide factor” defense will not be available to the employer if the plaintiff demonstrates an alternative business practice exists that would serve the same business purpose without producing the wage differential.

The Senate Bill would also extend the employers’ obligation to maintain records of wages and wage rates, job classifications, and other terms of employment to three years.

In addition, employers cannot forbid employees from disclosing their own wages, discussing others’ wages, asking about others’ wages, or aiding or encouraging other employees to exercise their rights under Labor Code section 1197.5. Employers, however, would not be required to disclose wages. The Senate Bill expressly prohibits employers from discharging, discriminating against, or retaliating against employees who invoke or assist in the enforcement of Labor Code section 1197.5.

The Senate Bill would create an additional employee private right of action with a one year statute of limitations, for employees who have been discharged, discriminated against, or retaliated against for engaging in any conduct protected by the statute.

Employees could seek reinstatement and reimbursement for lost wages and benefits, interest, and “appropriate equitable relief.” Alternatively, employees would be permitted to file complaints with the Department of Labor Standards Enforcement on allegations of employer violations of the new prohibitions.

With the potential for expanded exposure to gender based equal pay claims, employers should carefully consider and memorialize wage classifications based on non-gender based factors, memorialize the reasoning behind each classification and justify in writing the basis for the wages paid. If Senate Bill 358 is signed into law, you may want to discuss those thought processes with legal counsel well before you extend that employment offer and set employee compensation.

The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.