California Fair Pay Act (CFPA)

I hope you’ll join my Fox colleagues Keith Chrestionson and Jaemin Chang and me on January 27 for the next in our series of breakfast briefings in our San Francisco office.  Our breakfast series explores various topics of interest to the Bay Area’s business communities in informal presentations and interactive Q&A sessions.  This session will focus on new California laws and local ordinances that are most likely to affect employers throughout the state, including:

  • Legalization of marijuana and its effect on the workplace
  • Amendments to the California Fair Pay Act
  • “All gender” bathrooms
  • New rules for meal and rest periods
  • Domestic violence leave
  • Expanded prohibitions on smoking at work
  • State disability and paid family leave benefits
  • Local ordinances (parental leave, minimum wage)

The event will take place at:

345 California Street
Suite 2200
San Francisco CA 94104-2670
(View Google Map)

The presentation and Q&A session will begin at 8:30 a.m., followed by a networking reception at 9:30 a.m. Breakfast and refreshments will be served.  Please register here by January 25.

Here’s your annual roundup of new California employment laws. Since we’ve discussed many of these laws when they were enacted, I’m including links to those earlier discussions.

In addition to statewide legislation, local ordinances continue to proliferate. These include paid parental leave in San Francisco and numerous cities that have enacted their own minimum wage and paid sick leave requirements.

Copyright: alexraths / 123RF Stock Photo
Copyright: alexraths / 123RF Stock Photo

What can employers do to get ready?

  • Review pay practices to identify potential disparities based on race and ethnicity, as well as gender.
  • Ensure that applications do not elicit information on prior salary or juvenile convictions.
  • Obtain and install appropriate signage for single-user restrooms.
  • Make sure that human resources staff, hiring managers, and supervisors understand the changes affecting them.
  • Wonder what surprises the legislature has for us in the year ahead!

California’s Fair Pay Act, already the broadest in the nation, has now been expanded in two key aspects:

Pay day
Copyright: rawpixel / 123RF Stock Photo

First, the Governor approved SB 1063, so that the Fair Pay Act now protects against race-based disparities in pay.  Specifically, employees who perform “substantially similar work” under similar working conditions, must be paid equally, unless the employer can demonstrate that the wage differential is based on either:

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

Second, the law already requires that each factor must be relied on reasonably and account for the entire wage differential.  That part of the Labor Code has now been amended by AB 1676, to clarify that “prior salary shall not, by itself, justify any disparity in compensation.”

Clearly, the idea here is that initial wage differentials in hiring become compounded over the years if each subsequent employer relies on that prior wage rate.  Why pay someone $50k, when you know she (or now he) would be happy with $40k based on her/his current salary?  Going forward, the applicant will need to be paid what the position is worth, not just that she/he will take based on prior salary level.  Sounds fair, right?

Well, sounding fair and ease of implementation are two very different things.  I can only imagine the questions that will arise for employers who try to justify why one applicant (someone they really want to hire) can’t be paid a premium without bumping up everyone else in a substantially similar position.  And as we have pointed out here, the burden of demonstrating fairness is entirely on the employer, and here, that logic really plays no role.

Quite frankly, what the Fair Pay Act really requires is an overhaul of hiring practices for HR professionals in California.  Gone are the days when management can exercise discretion to negotiate salaries based on an applicant’s prior salary history, or the applicant’s negotiation skills.  Whether that is a good or bad thing for business in California remains to be seen.

 

I am looking forward to the California HR Conference sponsored by PIHRA (Southern California’s SHRM) coming up on August 29-31st in Long Beach.  If you haven’t registered, take a look at the three day list of speakers and networking events.

2016 California HR Conference

I will be speaking on the Top 10 Trending Issues for California HR on Monday, August 29th at 1:30 pm.  The session will provide a fast paced summary of the hottest issues facing HR professionals in California, including essential and practical tips for compliance.  I will cover many of the issues we have blogged about here, including the Fair Pay Act, joint employment, independent contractors, wage-and-hour trends, local minimum wage ordinances, PAGA considerations, and more.  If you attend, you will get an overview of the key legal issues facing California HR professionals in one session.

I hope to see you there!

We’ve written extensively about California’s Fair Pay Act, which requires equal pay for “substantially similar” work. (Think, I’m exaggerating? We wrote about it here, here, here, here, here, here, and here.) On July 20, 2016, we will be presenting a one-hour briefing on what employers should be doing to comply with the law. We’ll start at 8:30 a.m. at our offices at 345 California Street, 22nd Floor, San Francisco, CA 94104. You’ll hear from lawyers (Jade Buttman and me) and an economist (Dr. Hyowook Chiang of Welch Consulting) about concrete steps you can take to protect your company. 

You can register here.

The Fair Pay Act puts serious and, in some ways, unprecedented burdens on employers. Is your company protected?

Copyright: belchonock / 123RF Stock Photo
Copyright: belchonock / 123RF Stock Photo

The Fair Pay Act (codified at Labor Code § 1197.5) has been in effect in California for almost six months. Despite the fact that it has the word “Fair” prominently in the title, I think the statute is decidedly unfair. The problem with this new law isn’t that it prohibits discriminatory wage practices. Paying someone less because of gender is unquestionably offensive.

But while other laws require the employee to prove discrimination, the Fair Pay Act puts the burden on the employer to disprove discrimination. The plaintiff just has to point to two people in similar (not identical) jobs who earn different amounts and the employer then has prove that the difference is based on one or more legitimate factors, that the factors relied on are applied reasonably, and that those factors account for the entire wage disparity.

To make matters worse, in many cases, employers will need expert testimony to meet this burden. I don’t know how you show that legitimate factors account for the entire wage disparity without a statistician or economist. This is more than just a significant expense. It also means the cases will be harder to defeat short of trial. Because if the employer gets an expert to opine on what causes a wage disparity, you know the plaintiff can find an expert to give a contrary opinion. So winning on demurrer or summary judgment becomes that much less likely.

In almost every other type of lawsuit, the burden of proof is placed on the plaintiff. If you’re going to succeed in claiming that you’re entitled to damages, it’s on you to prove by a preponderance of the evidence that the defendant has wronged you. Putting the burden on the employer to prove that it didn’t discriminate is fundamentally unfair. Requiring employers to hire experts to meet that burden makes matters worse.

We’ll be conducting a breakfast seminar where we’ll offer concrete advice on steps employers can take to protect themselves. Here are the details.

Seven months ago, Governor Brown vetoed a bill (AB 1017) that would have prohibited California employers from asking applicants about their salary history. Now a new bill that contains some of the same language, AB 1676, is before the legislature. Under both AB 1676 and its predecessor:

Copyright: liravega258 / 123RF Stock Photo
Copyright: liravega258 / 123RF Stock Photo

An employer shall not, orally or in writing, personally or through an agent, seek salary history information, including, but not limited to, compensation and benefits, about an applicant for employment.

The new bill hasn’t made it very far and there’s no reason to believe it will fare better than AB 1017. But even if it doesn’t pass, should employers ask applicants about their prior earnings? I can think of three good reasons not to.

  • First, under California’s Fair Pay Act, salary history is not a proper justification for a pay disparity. So you can’t use that as a basis for paying one worker more than a co-worker who is performing “substantially similar” work. It’s easier to argue that you didn’t rely on this impermissible factor if you didn’t seek out the information.
  • Second, there seems to be growing sentiment that the question is improper and overly intrusive. For example, Alison Green, who writes the Ask a Manager blog, wrote this piece for US News giving tips on how to avoid answering the question directly.
  • Third, if you’re looking to fill a position, you should have some idea what people in that position make and what the value is to your organization. If you genuinely have no idea, maybe the benefits of asking the question outweigh the risks. But in most situations, asking for information that you’re prohibited by law from relying on is a bad idea.

Of course, if the legislature passes the measure prohibiting salary history inquiries, the issue will be moot.

Here’s another fun aspect of AB 1676. It says that: “an employer, upon reasonable request, shall provide the pay scale for a position to an applicant applying for employment.” I’ve never heard of such a requirement before. Even if you make applicants sign nondisclosure agreements, isn’t it just a matter of time before your competitors know what you’re paying your workers? While we may get into this in more detail in a later post, I’ll say now that I think it’s a very bad idea. I also think the legislature knows that, since they’ve had the foresight to specifically exempt themselves from that requirement.

UPDATE: On June 2, 2016, the Assembly passed AB 1676. It now heads to the Senate.

The recent lawsuit by five members of the US Women’s National Team against U.S. Soccer has received considerable media attention. Today’s post looks at what the lawsuit teaches us about California’s Fair Pay Act.

Before the Fair Pay Act took effect on January 1, 2016, the law required equal pay for equal work. From a defense perspective, you can argue that the women couldn’t meet that standard. You could argue that the stars of the women’s team, as brilliant as they are, don’t have the speed and power needed to earn a spot on the men’s team.

With the Fair Pay Act, however, you don’t need equal work. You need substantially similar work. For that inquiry, you look at “a composite of skill, effort, and responsibility” and whether the work is “performed under similar working conditions.” I suspect the women would meet that standard.

Copyright: ostill / 123RF Stock Photo
Copyright: ostill / 123RF Stock Photo

Disclaimer No. 1: By saying they couldn’t make the men’s team, I’m not denigrating the accomplishments of the US Women’s National Team. They’ve been the best in the world. Those of us who still talk about how close we came to an intramural high school basketball championship are in no position to cast aspersions.

Disclaimer No. 2: I’m not saying the women don’t deserve better treatment and higher pay. I’m just using this to illustrate how the law has changed. While I suspect the dispute will be resolved through negotiation, perhaps in the collective bargaining process, I’m rooting for the USWNT to score this goal.

On January 1, 2016, California put into place the nation’s most demanding law against gender-based wage disparities. We’ve written about this new law extensively. Keith Chrestionson also wrote this excellent piece for Corporate Counsel.

Now, with the law barely a month old, a bill has been introduced to extend the Fair Pay Act’s protections to wage disparities based on race and ethnicity. This new bill, SB 1063, is a long way from passing. But we’re seeing the start of a trend here and should expect to see more protected categories added over time.

The problem with the Fair Pay Act isn’t that it prohibits discrimination. All discrimination is equally odious, whether it’s based on gender, race, ethnicity, religion, age, disability, sexual orientation, or any of the other categories protected by the state’s anti-discrimination laws.

But while other laws require the employee to prove discrimination, the Fair Pay Act puts the burden on the employer to disprove discrimination. The plaintiff just has to point to two people in similar (not identical) jobs who earn different amounts and the employer then has prove that the difference is based on one or more legitimate factors, that the factors relied on are applied reasonably, and that those factors account for the entire wage disparity.

In almost every other type of lawsuit, the burden of proof is placed on the person claiming to be wronged. Putting the burden on the employer to disprove discrimination is fundamentally unfair. Add in double damages and attorneys’ fees and there’s a huge incentive for employees to bring these claims.

Want to know how to prepare your company? Here’s a good place to start.