This post is cross posted from the Labor & Employment Section Blog
Equal Pay Act Now Poses Challenges:
California’s Equal Pay Act, newly amended Labor Code Section 1197.5 (Senate Bill 358), now creates significantly expanded liability for employers. It also creates great uncertainty in the standards by which the equality of California pay practices will be judged. The amended statute became effective on January 1, 2016; legislative information on SB 358 is available at http://leginfo.legislature.ca.gov/.
The changed standards
The amendments substitute the standard of “equal work” “in the same establishment” with "substantially similar work" regardless of location. The existing defense of a “bona fide factor other than sex,” such as education, training, or experience, will now only apply if the employer demonstrates that the factor is not “derived from a sex- based differential in compensation, is job-related” and "...is consistent with a business necessity." Business necessity is defined as “...an overriding legitimate business purpose such that the factor relied upon effectively fulfills the business purpose it is supposed to serve." The defense will "...not apply if the employee demonstrates that an alternative practice exists that would serve the same business purpose without producing the wage differential."
Each such factor is only a defense if it is "applied reasonably" and accounts "for the entire wage differential." The amendments also extend the record keeping requirements for wage data and "other terms and conditions of employment" from two to three years.
Employees can file claims with the Division of Labor Standards Enforcement or as a civil action, in the latter case to recover "reasonable attorney’s fees" in addition to unpaid wages, liquidated damages, and costs of suit within two years (or three years, if the violation is deemed "willful"). Employees' rights to disclose wage data, to discuss the wage data of others, and to ask other employees about their wages for the purpose of enforcing rights under Section 1197.5, are all protected. In addition, an employer is prohibited from discriminating against an employee "in any manner” for the exercise of these rights.
Changing the definition of equal work to "substantially similar work," and the standard for discrimination to "in any manner discriminate," do more than expand the scope of a violation. The amendments include no definition of those terms, or of the expression "applied reasonably," nor do they provide guidance to the meaning of such terms. Accordingly, the amendments create significant ambiguity about how to evaluate a particular compensation plan.
How this amended law affects counsel and alternative dispute resolution.
Attorneys who advise corporations will want to alert clients about this new legislation, and of the need to audit their pay practices accordingly. Attorneys who represent individual employees will need to carefully assess the amended standards to determine whether existing compensation practices are no longer compliant with the new law. Counsel for all sides need to understand how these new standards will affect the mediation and settlement of claims under this law.
© 2016 Wm. David Smullin, Esq., Smullin Mediation