California Fair Pay Act
On October 6, 2015, Governor Jerry Brown signed Senate Bill 358 which amended the California Fair Pay Act which has existed in California since 1949. The original Act was enacted to “redress the segregation of women into historically undervalued occupations.” In amending the Act, the California Legislature observed that the current statutory language made it difficult for affected employees to successfully challenge gender-based wage discrimination in the workplace.
The newly drafted Labor Code section 1197.5 effectively reverses the burden of proof. The former code section forced the plaintiff to establish the existence of wage discrimination. The newly drafted code section requires an employer to demonstrate that any wage differential is based either on a “seniority system,” a “merit system,” or a system that measures earnings by quantity or quality of production. In addition, while an employer can still prove that a bonafide factor other than sex, such as education, training or experience is the basis of the wage differential, the defense of business necessity will not apply if the employee demonstrates that an alternative business practice exists that would serve the same business purpose without producing the wage differential. Essentially, the employee can inject themselves into the compensation plan of the employer and second guess it.
The code section goes on to provide that each of the above factors must be applied “reasonably” in that the factors relied upon must account for the “entire wage differential.” This provison would allow a trier of fact to decide whether the factors enumerated and proven by the employer entirely explain the wage differential. If not, the plaintiff would still prevail.
Pursuant to the terms of the newly effected code section, every employer is to maintain records of the wages, wage rates, job classifications and other terms and conditions of the employment of the persons employed by the employer for three years. Employers would be well advised to maintain the necessary metrics justifying their salary and wage decisions.
The Division of Labor Standards Enforcement is the primary enforcement vehicle for this code section. However, as in most labor statutes, a private right of action exists for the employee to recover wages to which the employee is entitled, including interest, an equal amount of liquidated damages together with costs of suit and reasonable attorney’s fees.”
As is usually the case in most labor statutes, an employer cannot discharge or 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 the law. Further, an employer cannot prohibit an employee from disclosing the employee’s own wages, discussing the wages of others, inquiring about another’s employee wages or aiding or encouraging any other employee to exercise his or her rights under the section. However, nothing in this newly enacted law requires an obligation to disclose wages.
Retaliation claims must be brought within one year of the retaliatory act. Claims to recover wages under the code section must be commenced no later than two years after the cause of action occurs unless the cause of action arises out of a willful violation of the code section in which event a three year statute of limitations applies.
Employers now faced with this newly enacted code section must consider enhanced record keeping to ensure that the terms, conditions and bases for promotions, demotions, productivity and other factors are maintained during the three year time period noted in the statute. These records will be crucial to any potential defense of a claim of discrimination in payment of wages on the basis of gender.
While the enacting provisions of the California Fair Pay Act are directed to redressing pay differentials of women, the law covers any gender-based pay gaps. Traditionally, female dominated industries where men have made inroads may also be affected.