California to Strengthen Equal Pay Law

Last week, California Gov. Jerry Brown signed the California Fair Pay Act, which may be the nation’s toughest equal pay measure. The new law goes into effect January 1, 2016 for employers with California-based employees.

The law expands on existing California and federal equal pay laws. One important expansion in coverage is elimination of the requirement that a wage differential be within the same establishment. The Act instead prohibits wage disparities when the work “is similar when viewed as a composite of skill, effort, and responsibility … .”

The changes are widely expected to make it easier for plaintiffs to file suit against their employers. The Act will burden employers with demonstrating that pay disparities are for one or more of the following:

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

The final factor can only apply if the employer demonstrates that the factor is not based on or derived from a sex-based differential in compensation, is job related with respect to the position in question, and is consistent with a “business necessity,” which means “an overriding legitimate business purpose such that the factor relied upon effectively fulfills the business purpose it is supposed to serve.” The latter defense does not apply “if the plaintiff can demonstrate an alternative business practice that would serve the same business purpose without producing the pay differential.”

The Act contains several other important details on retaliation, recordkeeping, complaint filing, and an employer’s inability to prohibit employees from disclosing their wages.

MSEC will develop resources on the Act over the coming weeks.