In an effort to further close the gender wage gap, California Governor Jerry Brown signed into law the Fair Pay Act on October 6, 2015.  The Act enhances existing law by putting more stringent requirements on employer pay decisions.  As of January 1, 2016, the Act will apply to all private and public businesses in the state of California.

Changes to Note

One of the biggest changes brought by the new law is that a pay-disparity claimant is required to show only that their role is “substantially similar work” to a higher-paid co-worker in regards to skill, effort, and responsibility. This is a more lax requirement than previous law, which required that a claimant show that he or she was engaged in “equal work” with the opposite sex co-worker. This new standard allows employee comparisons to be based on the performance of similar tasks, without taking into account the employee’s job title.

Another notable change is the ability to compare salaries across all employer locations (regardless of geography) to demonstrate pay disparity. Previously, pay comparisons between opposite sex co-workers were limited to employees within the same establishment.

The Fair Pay Act also clarifies that it is the employer’s responsibility to demonstrate that a pay differential is legitimate, due to any of the following:

  • Seniority system
  • Merit system
  • A system that measures earnings by quantity or quality of production
  • A bona fide factor other than sex, such as education, training, or experience

Finally, while there is no requirement that an employer disclose employee wages to other employees, the new law makes it unlawful for employers to prohibit such disclosure among and between employees.

To ensure that compensation practices will keep employers out of hot water, here are a few helpful tips:

  • Audit your employees’ compensation to identify pay differentials within your workforce.
  • Implement a structured compensation policy. Determine rationale for pay differentials and communicate that rationale to supervisors and management with the ability to make compensation decisions.
  • Emphasize that your company does not prohibit the discussion of salaries among employees, and train supervisors regarding employees’ freedom to discuss wages.
  • Ensure that your record retention regarding wages, wage rates, and job classifications is at least three years. Past pay decisions may end up being analyzed if a claim of pay disparity is filed