Why it matters

Reflecting the nationwide trend of pay equity, a new bill under consideration by California legislators would extend the state's Fair Pay Act (FPA) to include protections for race and ethnicity. Equal pay legislation and regulation is sweeping the country, with states like California and New York beefing up their laws and the federal government requiring employers to report pay data to the Equal Employment Opportunity Commission. Capitalizing on the trend, California lawmakers recently introduced Senate Bill 1063, which would extend the protections of the FPA to race and ethnicity, prohibiting employers from paying workers a rate less than that paid to employees of a different race or ethnicity for substantially similar work. The Wage Equality Act of 2016 is expected to pass both houses of the state legislature and move on to Governor Jerry Brown for an expected signature.

Detailed discussion

First enacted in 1949, the California Fair Pay Act (FPA) originally provided that an employer may not pay an employee at a rate less than that paid to employees of the opposite sex in the same establishment for equal work performed on equal jobs.

On January 1, a new bill took effect that lessened the burden on employees by requiring them to prove only that they received lower wages for "substantially similar" work and by eliminating the "same establishment" requirement.

The new bill also identified limited circumstances where an employer can show that wage disparity is based on a legitimate factor other than sex, added a prohibition regarding retaliation, and bulked up recordkeeping requirements for employers, requiring them to maintain records of the wages and wage rates, job classification, and other terms and conditions of employment for a three-year period.

Now, legislators are at work on a further expansion of the FPA, this time to add protections for race and ethnicity. The Wage Equality Act of 2016 would prohibit employers from paying employees a wage rate less than the rate paid to employees of a different race or ethnicity for substantially similar work, using the same evidentiary standards and burdens set forth in the January amendment to the statute.

The same affirmative defenses available to employers under the FPA would apply in instances of race or ethnicity. Only a seniority system, a merit system, a system that measures earnings by quantity or quality of production, or a differential based on any bona fide factor other than race or ethnicity (such as geographic location, education, experience, or training) will suffice.

Such defenses "shall apply only if the employer demonstrates that the factor is not based on or derived from a race- or ethnicity-based differential in compensation, is job related with respect to the position in question, and is consistent with a business necessity." The burden to establish a bona fide factor other than race or ethnicity is on the employer. For other bona fide job related differences, such factors can only be considered if they are reasonably applied to explain the entire compensation difference, as well as being compelled by business necessity.

To read S.B. 1063, click here.