California Revamps the Fair Pay Act

In 2016, the California Fair Pay Act was enacted into law. It is one of the first of its kind to forbid employers from paying workers of different sexes less money for “substantially similar work,” as opposed to “equal work,” making it more difficult to justify discriminatory pay. This law was also one of the first to apply to all employers regardless of company size.

Like most laws, however, this Act contains several exceptions to its mandate. One of the exceptions to the equal pay requirements is that employers can pay different amounts of money to people of the opposite sex as long as the difference in pay is based on some other legitimate, legally permissible factor. Because the Act is so new and many aspects of the law have yet to be litigated, however, those acceptable factors have not been clearly delineated by the courts.

When this law was first introduced, many of its backers proposed drafting an additional provision regarding the legality of other factors. For example, they wanted to prohibit employers from asking about prior salaries in order to prevent them from using past salary history as a way to suppress the current and future salaries of its employees. This did not become a part of the law at the time of its enactment.

New Year Addition

In 2017, a new addition to the Fair Pay Act is going into effect. Under the new provision, employers are also prohibited from paying different amounts to people based on race or ethnicity for substantially similar work. Again, the issue of which factors will be considered acceptable for differences in pay remains unresolved, but overall the law will continue to place the burden of ensuring equal pay on California employers.

Another change that will apply to California employers does clarify one of the factors that can be used to pay different amounts of money for substantially similar work. As a retread of the issue regarding employers asking about prior salaries, employers will no longer be able to use prior salaries as the sole determining factor for paying different amounts to people of different genders, races, or ethnicities.

What This Means for Employers

These changes mean that California businesses of every size need to ensure that they are still compliant with the Fair Pay Act. This means going over company policy books, training management, and having structures in place that limit any liability under the law. It is in situations like these that an ounce of prevention really is more valuable than a pound of cure.

Companies in California employ people from every background. Employers know that each individual contributes in different ways to the company bottom line, regardless of race, gender, or ethnicity. That is precisely why people make different amounts of money. Because of this law, companies need to ensure that those differences in pay are validated, documented, and legal. This is the best way to ensure compliance under the Act.

As the year progresses, ensure that your company is compliant with the new anti-discrimination provisions and other parts of the Fair Pay Act. When you are not sure, or need legal counsel to respond to a problem, contact us. Our team of labor and employment law professionals at the Royse Law Firm will guide you through all of the legal issues that are relevant to your situation.

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Roger Royse

Roger Royse, the founder of the Royse Law Firm, works with companies ranging from newly formed tech startups to publicly traded multinationals in a variety of industries. Roger regularly advises on complex tax structuring, high stakes business negotiations and large international financial transactions. Practicing business and tax law since 1984, Roger’s background includes work with prominent San Francisco Bay area law firms, as well as Milbank, Tweed, Hadley and McCloy in New York City.
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