California leads on pay equity, but additional protections on the way

The U.S. House of Representatives has passed a bill, now in the Senate, which seeks to ensure employees are compensated without regard to sex. The Paycheck Fairness Act (H.R. 7, 116 Cong.) has been proposed but never enacted in earlier congresses. Key aspects of the bill were the foundation of the California Fair Pay Act which was signed into law in 2015. Employers in California may have additional reporting requirements if the federal law is passed, but will have to make relatively few changes because the federal act has so much overlap with existing state law. The principal impact could be found in the new law's requirement that employers with more than 100 employees will have to start reporting otherwise confidential pay and workforce demographic data to the U.S. Equal Employment Opportunity Commission as a matter of course.

The federal legislation which passed the House is very similar to California law: It also prohibits asking a job candidate for historic salary data. And it also exposes employers to liability unless they can show that any wage gap between men and women is the result of a non-sex, business-based differential.

But the federal legislation includes a number of provisions which are not a part of California law. First, it makes pay discrimination class actions opt-out rather than opt-in. It also authorizes new programs designed to reduce wage disparity. And it requires employers to share salary data with the EEOC. This allows the EEOC to monitor for evidence of wage discrimination and improves its ability to enforce wage parity.

The California law, which went into effect Jan. 1, 2016, bars employers from asking job candidates for historic salary information. It prevents employers from implementing or enforcing internal policies preventing workers from discussing their salaries. And it requires employers to demonstrate pay disparities between employees of different sexes exist for job-related factors -- which include experience and performance.

The California law does not require employees who bring suit under the law to show any disparity in wages is based on discriminatory intent. If employees do show the disparity was intentional they may be entitled to additional recovery.

California's law also provides an enforcement mechanism for the Department of Labor Standards Enforcement and increases record keeping requirements related to compensation from two years to three years.

To date, the impact of the California Fair Pay Act has been fairly limited. Labor Code Section 1197.5 has barred California employers from taking sex into account when determining compensation since 1949. Additionally, many employees, most notably public employees' compensation information, was publicly available before the Act was passed. The federal Fair Pay Act places more of the burden of justifying a pay differential on employers, but has not created a huge uptick in new litigation since its passage. The additional burden on employers to demonstrate that any disparity in wages is job related means good record keeping is increasingly important.

The full Federal Paycheck Fairness Act is unlikely to be voted upon in the Senate, despite seven Republican House members crossing the isle to vote for it, as Senate Majority Leader Mitch McConnell has expressed his opposition to the bill in the past. California employers should continue to focus on ensuring they are following existing state law and creating procedures and records which demonstrate compliance.

While it is unlikely that the House bill as drafted will be enacted, one provision has a higher chance than the rest -- the provision which prohibits employers from retaliating against employees who discuss their salary information with their coworkers. Republicans in the House have also introduced a bill which protects employees who discuss their salary information. The Republican bill, the "WAGE Equity Act" was introduced as an alternative to the Paycheck Fairness Act. Given the overlapping provisions, it is possible the Senate could pass legislation reflecting provisions in the WAGE Equity Act.