Fair Pay Act and civil law

Image courtesy of Stuart Miles and www.freedigitalphotos.com

A new set of frequently asked questions about the California Fair Pay Act of 2015 – which took effect on Jan. 1, 2016 – doesn’t provide much guidance for employers trying to comply with the new legislation.

The FAQs were issued earlier this month by the Labor Commissioner’s Office, but it’s clear the courts will be responsible for interpreting and applying the new law.

Litigation is already in process. A lawsuit filed previously by female attorneys at Farmers Insurance has been amended recently to add claims under the California law.

So what does the new law do? It strengthens the state’s existing Equal Pay Act, with the goal of eliminating the gender wage gap. Currently in California, a woman working full-time earns an average of 84 cents to every dollar a man earns.

The requirements of the law

  1. First, employers have to pay employees equally for “substantially similar work,” even if they have different job titles and work locations. The previous law required equal pay for “the same type of work” – and only if it was conducted at the same location. Now, if the job requires similar skills, effort, responsibility and working conditions, it also requires equal pay.The law allows exemptions if pay systems are based on seniority, merit, quantitative or qualitative production, or a “bona fide factor other than sex.” Such factors might include education, training or experience — as long as the factor is job-related and consistent with business necessity. All bets are off, however, if the employee can demonstrate the existence of an alternative business practice that would serve the same purpose without producing a wage discrepancy.
  2. In practical terms, this means the burden of proof shifts from the employee to the employer. An employee no longer has to prove a pay disparity is unlawful. Instead, employers have to demonstrate that pay disparities are justified.
  3. The act allows employees to inquire about the wages of other employees and to discuss their own wages. The Legislature added this provision after concluding that employers were contributing to the wage gap by enforcing “pay secrecy.” Lack of discussion about pay means women have no way of knowing they are receiving less pay than their male counterparts.
  4. The Fair Pay Act also makes it easier for employees to sue for retaliation.

Actions employers should take

Here is what employers can do to limit claims of pay inequity.

  1. Conduct an audit of job descriptions and compensation rates. Make sure you addresses all forms of compensation, including bonuses and equity grants.Should you find pay differences between genders, determine whether they can be explained by seniority; merit; quantity or quality; or factors such as education, training and experience. If not, adjust compensation to comply.
  2. Document any reasons for wage disparities between similar positions. Implement clear guidelines for setting compensation levels. Tie salary increases, bonuses and other forms of compensation to objective criteria as much as possible.
  3. Modify employee handbooks to include provisions of the new Fair Pay Act. Be sure the handbook explains employees’ right to ask about their coworkers’ compensation without fear of retaliation or discrimination. Do not discourage discussions among co-workers regarding compensation.
  4. Educate management personnel on the Fair Pay Act. Knowledge will arm them to address questions, ensure compliance and insulate the employer from liability.
  5. Maintain records. The Fair Pay Act requires employers to maintain records for three years. The previous law mandated two years.
  6. Monitor developments. Stay tuned to see how it all plays out.