New California Law on Equal Pay


Photo by: Samuel Zeller

The new California law on equal pay between the sexes (SB 358) goes into effect January 1, 2016, and is considered the most aggressive equal pay law in the nation. The new law will create a much stricter standard for gender pay equity. California employers will want to begin preparing immediately for its impact.

The Law Requires Equal Pay for Equal Work

The new law will amend California’s Equal Pay Act to prohibit an employer from paying employees of one sex lower than 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.”

Limited Exceptions Available to Employers 

If a wage differential exists, employers will escape liability only if they can show that the wage differential is based on:

  • a seniority system;
  • a merit system;
  • a system that measures earnings by quality or quantity of production; or
  • some other bona fide factor other than sex such as education, training, or experience.

Should an employer attempt to justify a pay differential under this law as a bona fide factor other than sex, it must demonstrate 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. The law defines “business necessity” as an overriding legitimate business purpose such that the factor relied upon effectively fulfills the business purpose it is supposed to serve. This exception will not apply if the employee can show that an alternative practice exists that would serve the same business purpose without producing the wage differential.

Remedies Available to Employees

The new law allows employees to pursue claims of unequal pay through the Labor Commissioner or the courts. An employee who successfully claims unequal pay can recover:

  • wages lost as a result of the unequal pay;
  • interest;
  • an equal amount of liquidated damages; and
  • costs.

Employees who choose to file a lawsuit can also recovery attorney’s fees, notwithstanding any agreement to work for a lesser wage.

Prohibiting Employees from Discussing Wages is Illegal

The new law also bars employers from prohibiting employees from disclosing their own wages to others, discussing their wages, or inquiring about the wages of another employee. However, it doesn’t require that the employer disclose another employee’s wages or that an employee disclose his or her own wages in response to a co-worker’s inquiry.

Check your employee handbook to see if it prohibits employees from discussing their wages with co-workers.  I have seen this prohibition in numerous outdated handbooks that I reviewed.  This is usually the result of someone using a handbook from their previous employment as a template without being well-versed in employment laws.

Employers Now Required to Keep Records for 3 Years

The new law also increases record keeping requirements from 2 years to 3 years.

How Can Employers Prepare for the New Equal Pay Law?

Employers should conduct an internal audit of their pay rates for the same or similar jobs to see if differences exist between sexes. If disparities exist, can the entire amount of the wage differential be justified under the new law.

This analysis should be conducted with the advice and assistance of a California employment attorney so that the analysis may be protected by the attorney-client privilege.  If you need advice or assistance e-mail me or call (949) 529-0007.

Please read our disclaimer.

In: Employment Law, New Laws

Comments are closed.