Hunton Employment & Labor Perspectives

California Governor Jerry Brown indicated in late August that he intends to sign into law a California Senate Bill aimed at further closing gender pay gaps in California. On August 31, 2015, the California State Senate unanimously passed the bill which aims to eliminate gender wage gaps in California by amending the California Equal Pay Act to prohibit employers from compensating employees at wage rates less than rates paid to employees of the opposite sex for “substantially similar” work. Governor Brown was presented with Senate Bill 358 (“SB 358”) in early September, and it is anticipated he will sign it soon.

SB 358 creates narrow exceptions to the mandate that employers must pay men and women equally based on “substantially similar” work. To be excepted from the Act, an employer must demonstrate that the wage differential is based upon a:

• Seniority system,
• Merit system,
• System that measures earnings by quantity or quality of production, or
• Bona fide factor other than sex, such as education, training, or experience.

In addition, SB 358 contains a provision on wage transparency that prevents employers from prohibiting employees from disclosing or discussing the amount of wages with others, including inquiries about another employee’s wages.

Any employer who violates the California Fair Pay Act, once it becomes law, could be liable for an employee’s lost wages with interest, an additional equal amount as liquidated damages, costs for bringing a civil suit, and attorney’s fees. SB 358 also prohibits employers from retaliating against employees for exercising their rights under the California Fair Pay Act.

Employers in California have already noted issues SB 358 creates. SB 358 does not define what “substantially similar work” means. As a result, it is unclear whether employees with different job titles, but who perform many similar duties, may be entitled to receive the same wages. In addition, the bill eliminates the requirement that comparable employees be in the same establishment, which means an employee working in one office location for the employer could also challenge the wages paid to a male counterpart holding the same position at a different office location.

California joins other states that have passed legislation to address their own states’ wage gaps. In February 2015, Oregon presented legislation requiring equal pay for “equivalent work” and banning salary secrecy. Similarly, New York legislators pushed forward a set of equal pay laws in April 2015 that banned salary secrecy and addressed protections for women receiving less pay than men.

Once the bill is signed, it would take effect on January 1, 2016. With SB 358 poised to become law, employers should continue to monitor the development of the bill and continue to maintain accurate employee payroll records.