Equal Pay
California pushes forward with stronger anti-discrimination laws.
When California’s Fair Pay Act took effect on Jan. 1, it represented one of the toughest equal pay laws in the nation. The law represents the latest legislative change causing issues and concerns for employers throughout the United States.

Although federal anti-discrimination laws have long required that women and men be paid equally for the same work, the new law in California not only expands what may constitute a similar job, but also places the burden of demonstrating that any differences in pay for similar jobs are based on legitimate factors other than gender, such as education or experience, on the employer.

California’s and other states’ new laws could leave more employers open to lawsuits and claims of discrimination. In order to stay compliant, employers should take some time to understand the different laws that could impact them, review their pay scales, and make sure any pay differences can be justified by legitimate business reasons.

State and Federal Laws

The new California law puts a greater burden on employers to prove that they have not discriminated against employees with their pay practices. California employers now have to prove that any pay differences are based on any or all of four factors:

  • A seniority system;
  • A merit system;
  • A system that measures earnings by quality or quantity of production; or
  • A bona fide factor other than sex (such as education, training, or experience).

The California law also prohibits companies from banning employees from disclosing their own wages, asking colleagues about their wages, or talking about how much others are paid.

Next Steps

As more states pass equal pay laws, companies need to be sure that they comply with all required legislation. In order to remain in compliance and avoid potential discrimination claims, employers should take several steps.

Talk to the experts – Legal counsel can help companies stay up to date with any changes in laws and react to those changes. The Human Resources department can also be a valuable source of information on equal pay best practices.

Be prepared to justify pay differences – In California, employees must be paid the same for substantially similar work. This opens the door for comparisons between employees in different locations and different markets. All of this means that employers need to review jobs that have pay differences and evaluate whether those differences can be justified.

Conduct a wage audit – In order to be prepared to justify pay differences, employers should conduct a wage audit to review all pay and compensation-related policies and procedures, job descriptions, employee handbooks, and review and evaluation protocols. The audit should also consider and explain the skill required, the responsibility given, or the level of experience necessary for certain positions.

Consider adopting mandatory arbitration agreements – Many employers have already adopted mandatory arbitration agreements with class action waivers for all employees. However, many states have unique requirements that must be considered. Employers should consult with counsel to determine whether such agreements make sense for them.

Pay and compensation are often very sensitive subjects, and companies already need to navigate extensive laws around pay discrimination. With new changes in state laws, employers need to be even more careful about pay practices and policies, along with job descriptions. Otherwise, they could be facing even more litigation by employees who claim they have been discriminated against.