Today, California Governor Jerry Brown signed the California Fair Pay Act. The law is set to go into effect January 1, 2016. Below is our analysis from early September.
SB 358, known as the Fair Pay Act, is set to be signed by California Governor Jerry Brown. The law makes a number of revisions to California’s Equal Pay Act related to wage inequality, which will impact employers throughout the state.
The Fair Pay Act significantly changes current law by prohibiting employers from paying employees of different sexes less than each other for “substantially similar work” (prior law prohibited unequal pay for “equal work”). The new law places the burden on the employer to justify that any wage differences between men and women for substantially similar work is based on a seniority system, a merit system, productivity, or other “bona fide factor other than sex” (for example, education, training, or experience). The law expands the requirement that pay be equal among an employer’s different worksites, not just within each individual location.
An employer found to violate the law is liable for double the difference in wages it failed to pay, and, in addition, attorney’s fees incurred by an employee in bringing a lawsuit to enforce rights under the law. Employers are also prohibited from discharging, discriminating, or retaliating against an employee for invoking or assisting in enforcing the law. The law outlaws policies preventing employees from disclosing their pay or inquiring about another employee’s pay. Notwithstanding that many workers already have a legal right to discuss compensation, this law provides an additional avenue for a recovery against an employer who prevents an employee from discussing compensation with co-workers.
The law also increases an employer’s obligation to keep records of the wages, wage rates, job classifications, and other terms and conditions of employment of its employees from two to three years.
Employers can and should take a number of steps before the law goes into effect next year, including evaluating their current pay structures, training personnel who make compensation decisions about the factors that can legitimately be used to justify pay disparities, and updating internal policies to specifically prohibit pay discrimination. Employers should also be prepared to justify that any wage differences are based on a factor other than sex.
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