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What Employers Need to Know About California's New Fair Pay Act

Fair Pay Act.jpgCalifornia Governor Jerry Brown signed the Fair Pay Act into law on October 6, 2015. The law, which will take effect on January 1, 2016, takes aim at the gender wage gap in California. In the text of the bill, the legislature cited data from a U.S Census Bureau report that women employed full-time year-round in California made 84 cents to every dollar a man earned in 2013.

Changes Made by the Fair Pay Act

The Fair Pay Act will increase the obligations of employers in a number of significant ways and is one of the strongest measures of its kind in the country. This law strengthens California's existing equal pay law by prohibiting employers from paying employees of the opposite sex less for "substantially similar work," which is stricter than the previous "equal work" standard.

The law also increases the burden of employers to demonstrate that any pay discrepancy between males and females of substantially similar work is based on factors other than sex. Employers may do this by establishing that discrepancies are based on a seniority system, a merit system, or other "bona fide factors" other than sex such as education, training or experience. Moreover, the bona fide factor(s) will only apply if it is not the result of a sex-based discrepancy in compensation, is related to the position, and is a business necessity. The law defines business necessity as "an overriding legitimate business purpose such that the factor relied upon effectively fulfills the business purpose it is supposed to serve." An employee may overcome this argument by demonstrating there exists an alternative business practice that would accomplish the same business purpose without resulting in the wage discrepancy.

Additionally, the law eliminates the previous "same establishment" requirement, which means that these protections extend to employees at different locations for those employers who have multiple work sites. The law also prohibits retaliation for employees who seek protections under the new law and prevents employers from having policies that ban employees from discussing their wages, inquiring about another employee's wages or encouraging another employee to enforce his or her rights under the law. This law also creates obligations for employers to maintain records of wages, wage rates, job classifications and other conditions of employment for a three-year period.

What Are the Implications of the Fair Pay Act?

An employee who successfully establishes an equal pay claim may recover wages and interest, plus an equal amount as liquidated damages, as well as attorneys' fees. It is likely that employers will see an uptick in equal pay claims as a result of this new law. It is important to note that there is no requirement in the law that employees exhaust administrative remedies before filing suit. Prior to the law going into effect on January 1, 2016, employers should be proactive in making sure that they are in compliance with the law.

Consult with an Attorney

The success of your business is contingent not only on your ability to deal successfully with problems as they arise, but also on your ability and willingness to take on a proactive role in preventing problems. Contact the skilled San Jose business attorneys at Diemer, Whitman, & Cardosi, LLP to discuss your options.

Sources:

https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201520160SB358

https://www.cela.org/legislative/SB358FairPayFactSheet.pdf

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