California has historically proven itself a leader in progressing women’s rights and was one of the first states to adopt a statewide Equal Pay Act. Despite this, the California Legislature determined that in 2014, women in California who work full-time make only 84 cents for every dollar a male makes during the same amount of time, which amounts to a staggering $33 billion dollar loss for the state and families. To combat this, California’s new Fair Pay Act (Senate Bill 358) – which takes effect on January 1, 2016 – intends to close that gap by modifying existing laws and requiring employers to pay men and women equal pay for “substantially similar” work.
Under existing California law, an employer cannot pay an employee a wage less than what an employee of the opposite sex earns in the same establishment for equal work. (Cal. Lab. Code § 1197.5). The Fair Pay Act therefore amends that law by ensuring that men and women who perform substantially similar work, receive the same wages, even if they have different job titles or they work in different locations for the same employer. This can be concerning because it seems as though virtually any employee whose job title or location differs from a higher paid and similarly situated employee of the opposite sex can file a lawsuit against their employer for discrimination and violation of the Fair Pay Act. “Substantially similar work,” however, will be considered as a composite of skill, effort, and responsibility when performed under similar working conditions. For example, the Act seeks to equalize wages of a male “janitor” who is performing the same type of work for the same company as a female “maid”.
Under the Fair Pay Act, an employer must show that the difference in pay is based on factors that are reasonable and related to the employee’s job, and unrelated the employee’s gender. Specifically, an employer must demonstrate that (a) the difference in pay is reasonably based on factors such as a seniority or merit system (e.g., the amount of hours an airplane pilot must fly to qualify as a captain); (b) the quantity or quality of their production (e.g., the standard by which a head chef must prepare food compared to a line cook); or (c) on a business necessity such as a difference in education, training, or experience. The Act defines a “business necessity” as an “overriding legitimate business purpose…that…effectively fulfills the business purpose it is supposed to serve.” For example, if a lower paid professor at a university challenged the higher salary of another professor of the opposite sex, the university would have to show that the higher paid professor possesses a more advanced degree, has conducted extensive research in that field, or has taught the subject for a longer period of time.
The California Legislature also included additional safeguards for employees who want to discuss or ask about their wages. Under the Fair Pay Act, an employer cannot prohibit an employee from (1) disclosing his or her own wages, (2) discussing the wages of others, (3) inquiring about another employee’s wages, or (4) aiding or encouraging another employee to exercise his or her rights under the Act’s provisions. The Legislature indicated that pay secrecy contributes to the gender wage gap because employees cannot challenge wage discrimination that they do not know exists. They went on to say that although California employers currently cannot ban discussions about wages and cannot retaliate against employees for doing so, many employees are unaware of these protections and others are afraid to exercise these rights due to potential retaliation. Therefore, employees may freely discuss their own wages and inquire about the wages of other employees without the fear of being fired.
As a preventative measure, employers should prepare detailed job descriptions for each of their employees. A basic job description includes information regarding the general nature of the work to be performed, some indication of the responsibilities and duties, and the employee characteristics required to perform the job. On the other hand, an effective detailed job description should include an unambiguous job title; whether the position is full-time, part-time, or temporary, and exempt or non-exempt; the essential and specific duties, responsibilities, and functions of the job; the type and extent of knowledge and skill, and physical abilities necessary to perform the job; the scope of the employee’s decision-making authority and whether they can hire/fire or supervise other employees; the qualifications (e.g. licenses and skill) of the position; and the physical/geographic location of the job.
Using a detailed job description to be specific about an employee’s role will help dispel whether two employees perform substantially similar work. Thus, an employee will know precisely what his or her duties are and the justification for their wages, leaving little room for confusion or a perception of unfairness when a person of the opposite sex earns a higher wage. Employers should also proactively audit their existing employee pay rates and reevaluate the current market rates for certain positions.
California’s new Fair Pay Act may be the nation’s most aggressive attempt yet to close the salary gap between men and women. Although the Act’s intentions are obvious and its rules are clear, employers should seek a legal advisor who can effectively guide them through the process of ensuring that their current compensation policies are compliant with the new Fair Pay Act and ensure that they have documents supporting their compensation policies.