Female mid-managers at the Walt Disney Co. recently requested class certification in a lawsuit against Disney entitled LaRonda Rasmussen, et al. v. The Walt Disney Co. et al. The plaintiffs in the lawsuit seek $150 million in damages on behalf of themselves and other female mid-managers who worked for the Walt Disney Co. throughout the United States. The lawsuit against Disney alleges that the company discriminated against women who worked for them in that “across all of its business segments and at all levels of the company, Disney routinely underpays its female employees, passes them over for promotion, piles on extra work without additional compensation, and does not supply sufficient support staff to allow women to succeed at their jobs.” This is a violation of California’s equal pay laws. At the heart of this and other discrimination lawsuits is whether an employer treats its female employees differently than their male counterparts.
One of the plaintiffs in this case alleged that each of the six men holding the same title as her (“Manager, Product Development”) in 2017 had a much higher base salary – The lowest-paid male Manager received $16,000+ more in base salary than this plaintiff, while the highest-paid male Manager was paid almost $40,000 more. This plaintiff alleged that on average, male Managers made $26,000 more that female managers. She further alleges that although she had a “Manger” title, she was performing the duties of a Senior Manager, and when compared against the salary of male “Senior Managers” Plaintiff was allegedly shortchanged by an average of nearly $50,000. This demonstrates that women were not receiving equal pay for equal work.
California’s Equal Pay Act (Labor Code Section 1197.5)
Section 1197.5 of the California Labor Code attempts to address this equal pay problem by prohibiting an employer from paying employees at rates less than those paid to 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, unless the employer demonstrates that one or more specific factors, reasonably applied, account for the entire wage differential. The same prohibition exists for pay disparity between employees of another race or ethnicity for substantially similar work. Prior salary, by itself, may not justify a pay differential.
However, an employer may make a compensation decision based on an employee’s current salary as long as any wage differential resulting from that compensation decision is justified by one or more specified factors, including a seniority system, a merit system, or a system that measures earnings by quantity or quality of production.
Companies Should Conduct a Company-Wide Audit of Their Pay Practices to Ensure Equal Pay
Here’s why: Companies run into trouble when they neglect to periodically review their pay practices throughout the entire company, especially those that have been in business for as long as Disney has. Like compounding interest, unnoticed pay disparity tends to compound and is unintentionally perpetuated over time. For example, 10-years ago, it was legal to ask employees what they made at their prior positions. A company may offer a little more than the person made at their last job, thinking that it was the necessary incentive to entice a new hire, without comparing the pay against what male employees in the same position were making. The woman may not have received equal pay and was underpaid at her last job, and that underpayment is perpetuated at the new company. That same woman may then get incremental raises like everyone else but because she started behind the curve, the pay disparity continues over the years.
PRACTICAL TIP: If your business has not reviewed its hiring policies, procedures, and paperwork or conducted a pay audit, this is a reminder to do so, making sure that employees who are performing similar duties or are in similar positions are paid equally, or that any disparity in pay could be justified based on merit, seniority, or based on production. Beginning in 2023, employees may also request the pay scale for their position, which employers must now provide for the position in which the employee is currently employed.