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California's Fair Pay Act

On October 6, 2015, Governor Brown signed the California Fair Pay Act (SB 358) (the “Act”), amending Section 1197.5 of the California Labor Code. The Act strengthens California’s existing equal pay provisions and wage disclosure laws.  The Act will take effect January 1, 2016.

Equal Pay Provisions

Section 1197.5 of the Labor Code previously prohibited employers from paying different wages to employees of the opposite sex “in the same establishment for equal work on jobs the performance of which requires equal skill, effort, and responsibility, and which are performed under similar working conditions.”

The Act changes the “equal work” standard, and instead requires that employers pay employees of the opposite sex equal wages “for substantially similar work, when viewed as a composite of skill, effort, and responsibility, and performed under similar working conditions.”  The Act also eliminates the “same establishment” language, which opens up the possibility of comparing employees’ pay in different “establishments.”

The Act retains exceptions for wage differentials adopted pursuant to one or more of the following factors, provided the factors are applied reasonably and account for the entire wage differential:

  • a seniority system,
  • merit system,
  • a system which measures earning by quantity or quality of productions, OR
  • any bona fide factor other than sex, such as education, training or experience.  The bona fide factor other than sex must be job related and consistent with business necessity, and must not be based on or derived from a sex-based differential in compensation. The bona fide factor other than sex defense fails if an employee can demonstrate that an alternative business practice exists that would serve the same business purpose without producing wage differentials

The Act prohibits employers form retaliating against an employee for exercising the rights provided by the Act.

Remedies include the wage difference, interest, an equal amount for liquidated damages, and attorneys’ fees and costs.  Records must be kept for three years, instead of the two previously required. The statute of limitations for an action to recover wages is 2 years from after the cause of action occurs, or 3 years if the violation is willful.  An action to for a violation of the anti-retaliation provisions is 1 year.

Wage Disclosure Provisions

The Act expands the protections afforded by Labor Code Section 232, which prohibits discriminating against an employee for disclosing his or her wages. Under the Act, employers must not “prohibit an employee from disclosing the employee’s own wages, discussing the wages of others, inquiring about another employee’s wages, or aiding or encouraging any other employee to exercise his or her rights under” Section 1197.5. The Act specifies, however, that nothing in Section 1197.5 creates an obligation to disclose wages.  Remedies include reinstatement, reimbursement for lost wages and benefits, interest, and equitable relief. The statute of limitations for a violation of the wage transparency requirements is 1 year.

For the full text of the California Fair Pay Act (SB 358), please click here.

 

Please note that this summary is not intended to constitute legal advice. 

If you have questions regarding compliance with the California Fair Pay Act or other employment laws, please feel free to contact either Kristin Pedersen or Maki Daijogo at Daijogo & Pedersen, LLP through our website, www.dpemploymentlaw.com, or by calling us at 415.924.9400.

Legal Disclaimer

Legal Disclaimer and Notice:
These updates have been prepared by Daijogo & Pedersen, LLP for informational purposes only and are not legal advice. Transmission of this information is not intended to create, and receipt does not constitute, an attorney-client relationship. Information on this website should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.