• New Expansion to Existing Pay Equity Protections
  • January 4, 2017 | Authors: Katherine A. Hren; Eric W. Mueller; Richard S. Rosenberg
  • Law Firm: Ballard Rosenberg Golper & Savitt LLP - Glendale Office
  • Last year, we reported upon the significant changes which the California legislature made to the job bias law known as the Fair Pay Act. Beginning January 1st, that law will be broadened in two very important ways. First, it expands existing coverage for gender pay differences to any pay disparities based on race or ethnicity (SB 1063). Second, when setting pay, employers cannot use an applicant's prior salary history as the sole basis for determining the employee's pay (AB 1676). We explain both developments below.

    Race and Ethnicity.
    Under the existing Fair Pay Act, an employer is prohibited from paying any employee a wage rate less than that paid to an employee of the opposite sex when performing " substantially similar work" when viewed as a composite of skill, effort, and responsibility, and performed under similar working conditions. If a wage differential does exist, the employer must be able to demonstrate that the wage differential is based on one of the following factors: (i) a seniority system; (ii) a merit system; (iii) a system which measure earnings by quantity or quality of production; or (iv) a bona fide factor other than sex, such as education, training or experience. SB 1063 now requires a pay differential to be justified by a bona factor other than the employee's sex, race or ethnicity, thus greatly expanding the protections of the law.

    As previously detailed, existing law places the burden on an employer to justify gender-based wage disparities. Now employers must satisfy this heavy burden to demonstrate fairness relating to any pay disparities between employees of different races and ethnicities.

    Setting Pay. In a separate but related law, AB 1676 amends Section 1197.5 of the Labor Code (Fair Pay Act) to state that " prior salary shall not, by itself, justify any disparity in compensation." This means that an employer would be barred from relying on prior salary alone to meet its burden to show that any pay disparity was based upon a "bona fide factor" other than race, gender or ethnicity. This protection was included because the Legislature felt that the market is inherently biased, and thus allowing employers to base future wage determinations on prior salary would simply perpetuate existing wage disparities among men/women and persons of different ethnicities or races.

    Given these significant changes in the law, employers should carefully review their pay practices to determine whether and to what extent pay disparities exist based on gender, race or ethnicity for those employees performing substantially similar work.