As the latest example of the heightened focus on addressing pay discrimination, on October 6, 2015, California Governor Jerry Brown signed what many are calling the toughest equal pay law in the country – the California Fair Pay Act, an initiative designed to close the gender wage gap in the state.

At the heart of the Act is a requirement for employers to demonstrate any gender “wage differentials” are the result of legitimate considerations, and not because of sex discrimination.   And the reason why the Act is being heralded as one of the toughest in the country is because it establishes that employees of the opposite sex must be paid for “substantially similar work” rather than an “equal work” requirement.  Additionally, the Act provides only four options for legitimate explanations for the differences in pay:

  1. A seniority system.
  2. A merit system.
  3. A system that measures earnings by quantity or quality of production.
  4.  A bona fide factor other than sex, such as education, training, or experience. This factor shall apply only 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.

For these reasons, its imperative California employers, undertake special care to perform a privileged, proactive pay analyses designed uncover any unexplained differences in pay.  This proactive tool, if performed correctly, will enable employers to learn “what they don’t know” about their pay systems and resulting employee compensation and address any issues before they become problematic.

In addition to these stringent non discrimination standards, the Act takes a page from the recently finalized federal Pay Transparency regulations and prohibits retaliation against employees who discuss or disclose information about compensation.