The California Fair Pay Act (CFPA) took effect a little over a year ago (January 2016) but already has been expanded to:
- Prohibit the use of salary history alone to justify differences in pay; and
- Prohibit pay differences based on race and ethnicity (in addition to gender) between employees performing substantially similar work.
Effective January 1, 2017, salary history alone cannot be used to justify any disparity in compensation between employees doing substantially similar work. Recall that under the CFPA, neutral pay factors used to explain a pay disparity between men and women (and now employees of different races and ethnicities) must “account for the entire wage differential.” Thus, for instance, a newly-hired female making $50,000 in her prior job must be paid the same as a male doing “substantially similar work” with the same relevant qualifications. And, while a difference in pay for the newly-hired female might be explained by differences in other factors, such as experience and education, a lower prior salary alone no longer is sufficient to justify that difference.
Massachusetts, Philadelphia and now Puerto Rico already have banned employers from asking candidates about salary history, and several other states and cities are considering similar bans.
The CFPA also now prohibits employers from paying “any of its employees at wage rates less than the rates paid to employees of another race or ethnicity for substantially similar work, when viewed as a composite of skill, effort, and responsibility, and performed under similar working conditions.”
Remember that under the CFPA, employers can no longer rely on the notion of equal pay for equal work. Instead, the state adopted a “substantially similar work” test for determining which jobs can be compared, which is decidedly more expansive. This allows employees and courts to compare wages of employees who perform similar work, even across job titles. Furthermore, comparisons are no longer limited to the “same establishment.”
California already had strong laws regarding equal pay. With the passage of these amendments, employers need to be proactive in examining their pay practices to ensure compliance and find and fix any issues.