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California Equal Pay Laws

In 1949, California passed the Equal Pay Act (“EPA”) which prohibited employers from paying employees less than employees of the opposite sex for equal work. Though the act aimed to close the gender wage gap, wage discrimination persisted for decades. The law, as then framed, made it difficult for a woman to establish a successful claim against her employer and employers found loopholes which allowed them to continue discriminatory practices.

In 2015, California passed the Fair Pay Act which  significantly strengthened equal pay laws and made it simpler for women to receive compensation for gender-based wage discrimination. Additional amendments were made in 2016 and 2017 to expand the scope of the Equal Pay Act, including prohibiting wage discrimination based on race or ethnicity as well as protecting against retaliation.

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Can My Employer Pay Me Less Than Another Employee of the Opposite Sex or Race or Ethnicity?

No. An employer is prohibited from paying any employee wages that are less than what it pays those of the opposite sex, or of another race or ethnicity, who perform “substantially similar work” under “similar working conditions.”

It does not matter that the employer did not intend to pay you less because of your sex, race or ethnicity. Employees are entitled to equal pay and an employer is liable for equal pay violations regardless of the employer’s motivations.

What Does “Substantially Similar Work” Mean?

Previously, employers attempted to get around equal pay laws by assigning different job titles to those of the opposite sex, race or ethnicity even though they were doing nearly identical work as their counterparts. California closed this loophole with the Fair Pay Act of 2015 (which became effective January 1, 2016), by substituting a “substantially similar” standard in place of an “equal” work standard.

This means that an employer can no longer use different job titles or small differences in responsibilities to avoid liability. Now, an employee who earns less for comparable work may have a claim against his/her employer if the work itself is substantially similar. In determining whether the employees perform “substantially similar” work, the following factors will be considered:

  • Skill: This refers to experience, training, education and ability required to perform the job. Skills unrelated to the job requirements are not considered and cannot be used as a pretext for unequal pay. The fact that the higher earning employee uses his/her skill more often is also not relevant. Small differences in the level of experience is typically not important.
  • Effort: This refers to the amount of physical or mental exertion needed to perform the job, considering the total job requirements. Job factors that cause or alleviate stress and mental fatigue are considered. The fact that the two employees do not share the same kinds of effort does not defeat the employee’s unequal pay claim.
  • Responsibility: This refers to the degree of accountability or duties required to perform the job. For example, an employee who sometimes supervises others has substantially greater job responsibilities than an employee without supervisory duties. However, if a significant portion of the job is identical, small differences in job duties are not a bar to an unequal pay claim.
  • Working Conditions: This has been interpreted to mean the physical surroundings (fumes, ventilation, temperature, etc.) and hazards, such as exposure to toxic chemicals or fumes. The fact that the higher earning employee works a different shift is not by itself a differentiating “working condition”.

It does not matter that the employer did not intend to pay you less because of your sex, race or ethnicity. Employees are entitled to equal pay and an employer is liable for equal pay violations regardless of the employer’s motivations.

Do Government Employers and Small Business Owners Have to Abide by the Equal Pay Act?

Yes. The California Equal Pay Act applies to all California employers, including public employers as well as private employers (regardless of size).

What If the Other Employee Works at a Different Facility or Location?

Under the current law, it does not matter that the higher earning employee is located at a different facility or location. The Equal Pay Act was amended to eliminate the requirement that the employees work at the “same establishment” (same physical place of business). This is particularly helpful for employees who work for large companies with more than one worksite, office, facility or branch.

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What “Wage Rates” are Included?

The California Equal Pay Act does not define “wage rates”. However, since the state and federal Equal Pay Acts are fairly similar, the federal meaning of “wages” is helpful. Under the federal Equal Pay Act, “wages” includes all forms of compensation regardless of:

  • The time of payment;
  • Whether payment is paid periodically or deferred until a later date;
  • Whether called wages, salary, profit sharing, expense account, monthly minimum, bonus, commission, hotel accommodations, use of company car, or by some other name.

Fringe benefits are also considered “wages” and include such things as:

  • Stock options
  • Vacation or holiday pay
  • Leave
  • Retirement benefits
  • Medical insurance
  • Hospital insurance
  • Accidental insurance
  • Life insurance
  • Bonuses

All fringe benefits are included in calculating wages, even if such benefits cost more to provide to female employees than male employees.

How Can I Prove Wage Discrimination?

Pay secrecy is a persistent contributor to the gender wage gap. Women cannot challenge wage discrimination if they do not know it exists. For this reason, California amended the Equal Pay Act to promote transparency and include anti-retaliation protections. An employer cannot fire, lay off, or in any manner discriminate or retaliate against employees who discuss their wages. It is illegal to prohibit employees from disclosing his/her own wages, discussing the wages of others, inquiring about another employee’s wages, or aiding or encouraging another employee to pursue a claim for wage discrimination.

An employee is allowed to ask his/her employer regarding the wages of co-workers, although there is no requirement for the employer to provide this information. However, the employer cannot retaliate or discriminate against an employee for requesting this information.

Can My Employer be Excused for Wage Discrimination?

Yes in some cases, but California amended its equal pay laws to make it harder for employers to justify wage discrimination. Once an employee shows that he/she was paid less than an employee of another race, gender or ethnicity for substantially similar work, the burden shifts to the employer to prove that the pay discrepancy was due entirely to a legitimate, non-discriminatory reason.

The employer must show that the unequal pay was based on one or more of the following factors:

  • A merit system
  • A seniority system
  • A system that measures earnings by quantity or quality of production
  • A bona fide factor other than sex, race or ethnicity, such as education, training, or experience.

The “bona fide” factor applies only if the employer demonstrates that the difference in education, training or experience is: (1) job related with respect to the position in question, (2) not based on or derived from a sex-based or race- or ethnicity-based differential, and (3) consistent with a business necessity. “Business necessity” means an overriding legitimate business purpose for which no alternative business practice exists that would serve the same business purpose.

The employer must further prove that, whatever factor(s) it relied upon to justify the unequal pay, the factor was applied reasonably and accounts for the entire difference in pay.

Additionally, the Equal Pay Act was amended to prohibit employers from relying on an employee’s prior salary to justify any pay difference between employees of the opposite sex or of another race or ethnicity. Nor can employers inquire into or require women to disclose their prior salaries (which includes compensation and benefits) during salary negotiations. Women, particularly women of color, have historically earned less than their male counterparts and continue to earn less in nearly every occupation and across all education levels. An employer’s reliance on a candidate’s pay history to set the new salary causes historical patterns of gender bias and discrimination to repeat themselves, systematically relegating women to lower earnings. California’s salary history ban is a step towards eliminating the gender wage gap.

What Happens If I Prevail in My Equal Pay Claim?

If you prevail, you can recover the difference in pay and interest on the difference, plus an additional equal amount as liquidated damages. The difference in pay for which you can recover can include the number of paid vacation or sick days, retirement benefits, and other fringe benefits. Additionally, if you hire an attorney and file a lawsuit, you can recover the costs of the lawsuit and reasonable attorney’s fees.

How Soon Do I Have to File a Lawsuit?

You must file a claim within two years from the date of the violation, or within three years if the violation is willful. For purposes of calculating the deadline, each paycheck in which you received unequal pay is considered a violation.

If you believe you are being paid less than another employee of the opposite sex or different race or ethnicity, contact our experienced employment attorneys to receive a free consultation at 1-800-689-0024.

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