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Employers: California's New Fair Pay Act - What You Need to Know

Fair Pay Act

Senate Bill 358, the Fair Pay Act, was signed into law by California Governor Brown in October. The new law goes into effect January 1, 2016. Being called the strongest equal pay law in the country, this bill revises and expands requirements that were already in place, and is intended to reinforce equal pay across genders.

While it was already illegal to pay employees different wages based upon their gender or race under current California law, the new law eliminates the requirement that the pay difference be "within the same establishment" and eliminates use of the terms "equal work" for "equal skill, effort, and responsibility."

Instead, SB 358 prohibits an employer from paying any of its employees less than employees of the opposite sex for "substantially similar work, when viewed as a composite of skill, effort and responsibility."

In addition, the legislation places specific requirements on employers to affirmatively show that any wage differential is not unlawful but is instead based entirely and reasonably upon one or more acceptable listed factors, including seniority and merit systems or other bona fide factors coupled with a showing of "business necessity".

If challenged, employers can justify different pay if the employer can show it is based on one or more of the following factors:

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

The Fair Pay Act prevents employers from terminating or otherwise retaliating against an employee who exercises their rights under the law, or helps other to do so. Notably, employers also may not prohibit employees from disclosing what they are paid, discussing the wages of others, or asking about other's wages.

The law also requires that employers maintain records of the wages and wage rates, job classifications, and "other terms and conditions of employment of the person employed by the employer" for three years.

The new law becomes effective January 1, 2016. Employers will want to review their pay practices in light of this new law and determine how best to preserve evidence that documents and justifies the different rates of pay for employees. HR should begin collecting detailed information on the specific job activity of every worker, not just the job description, and what everyone is paid.

Should you have any questions or concerns about how the Fair Pay Act will affect your workplace, please Contact Us!



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