November 4, 2015

Governor Brown Signs “Country’s Toughest Equal Pay Law”

On October 6, 2015, Governor Jerry Brown signed the California Fair Pay Act (SB 358) —considered to be the toughest equal pay law in the country.  The law strengthens existing gender pay equity protections for workers and imposes stiffer penalties for gender-based wage discrimination.

Specifically, the law prohibits employers from paying different wage rates for “substantially similar work.”  Traditionally, aggrieved employees had to prove they were being paid less for “equal” work in the same establishment.  Now the burden is on the employer to explain the pay differential between employees by demonstrating the difference in pay is based on seniority, merit or work quantity or quality.  An employee who successfully proves an equal pay claim may recover backpay, liquidated damages, interest, and any costs and attorneys’ fees incurred in bringing the action.

The new law also prohibits retaliation against employees for discussing their wages or exercising their rights under the law. However, the law expressly states that “[n]othing in this section creates an obligation to disclose wages.”  In addition, California employers will now be required to maintain records of employee wages, “job classifications, and other terms and conditions of employment” for three years instead of two years under existing law.

An employee can file a civil lawsuit or an administrative complaint with California’s Division of Labor Standards Enforcement if the employee “has been discharged, discriminated, or retaliated against” for discussing, questioning, or disclosing employee wages.  An employee may obtain reinstatement, backpay and interest for bringing a successful retaliation claim under the new law.

The new law goes into effect on January 1, 2016.  Employers should review their pay policies and begin performing skill assessments to identify bona fide factors other than gender for pay differentials or consider adjusting pay to achieve wage parity where such factors are absent.