Your company has been trying to fill a position for months. None of the candidates you’ve seen have the right qualifications. It’s frustrating for management and for the workers who have to do extra work while the position is vacant.
Then a candidate comes in and he seems perfect. He has great job experience, is smart, interviews well, and seems genuinely interested in the position and your company. The only drawback is that he’s currently making more than you typically pay for the position. But to get a great candidate in this hard-to-fill position, it’s worth it to you to pay him more. Right?
The answer depends on what the real costs are. Because if you have women in your organization doing substantially similar work for less money than you’re paying this new hire, you’ve exposed yourself to a claim under California’s Fair Pay Act. Salary history is not a proper justification for a pay disparity.
Here’s another scenario. You have two open positions. One in San Francisco and one in Sacramento. The best applicant for the one in SF is a man who negotiates the salary fairly aggressively. The best applicant in Sacramento is a woman who does not. You like them both. Can you pay the man more because he negotiated harder? Can you pay him more because he’ll be working in a location with a higher cost of living? The answer to both questions is “no.” Those are not permissible considerations under the Fair Pay Act.
We’ve written about this new law extensively. Keith Chrestionson also wrote this excellent piece for Corporate Counsel. As with so many aspects of California employment law, being proactive is the key. The first step is a review of your pay practices and policies, ideally with counsel involved to protect the review under the attorney-client privilege. Another important early step is making sure that the managers doing your hiring understand the permissible bases for differences in compensation.
Litigation under the FPA will be expensive and uncertain. The standards are vague and some unlucky employers are going to serve as guinea pigs while courts figure out what the law really means.