California Fair Pay Act Increases Risk of Liability for Gender-Based Differentials in Pay

California will soon hold the toughest fair pay act in the country. In an effort to close the wage gap between men and women, California recently signed into law “The Fair Pay Act” requiring comparable pay for “substantially similar” work. Expected to take effect January 1, 2016 the legislation also shifts the burden of proof of acceptable pay differences to the employer. JD Supra Business Advisor/Hopkins & Carley define the details.



Last week, Governor Brown signed Senate Bill 358, the California Fair Pay Act, a bill intended to help eliminate inequality between the wages of male and female employees.  The new law becomes effective on January 1, 2016.

Existing law already prohibits discrimination in compensation, but Senate Bill 358 enhances existing protections by reducing the burden of proof placed upon employees alleging discriminatory pay practices and increasing the amounts recoverable by employees who assert a claim.

Under the new law, an employee claiming discrimination in pay must show only that she is not being paid the same as a male counterpart for substantially similar work.  The law expressly permits an employee to compare her pay to that of a male who holds a different job, but one that is substantially similar in terms of skill, responsibility and working conditions.  If the employee succeeds in demonstrating that she is paid less than a male employee for substantially similar work, the employer must then justify the difference by showing that it is attributable entirely to (a) a seniority system, (b) a merit system, (c) a system that measures earnings by quantity or quality of production, or (d) a bona fide factor other than sex (such as education, training or experience) consistent with a business necessity.  Employers must also show that any factor cited as a reason for the discrepancy is applied reasonable.  As a result, employers that do not conduct systematic, comprehensive and well-documented performance evaluations are likely to be unable to justify differentials in pay by citing merit or performance as the cause.

Employees who prove the existence of discriminatory pay practices pursuant to the new law are entitled to recover the differential in pay, interest, and liquidated damages equivalent to the differential in pay, essentially creating a “double damages” remedy in every case.

Aside from making it easier for employees to prove discriminatory pay practices and enhancing the remedies available, the new law also prohibits employers from preventing employees from discussing their wages, a common practice at many companies.

What should employers do now?

  • Increase awareness of wage discrepancies – In light of the lower standard of proof and greater potential liability, employers should be more alert to discrepancies in pay that could create a basis for a claim.
  • Consider whether a thorough review of compensation practices is warranted – Employers who become aware of sex-based discrepancies in pay between employees performing substantially similar work should consider whether to conduct a thorough and systematic review of their compensation practices to determine the cause of the discrepancy and the extent of their potential liability.
  • Conduct any review of compensation practices under attorney-client privilege – Employers who elect to review their compensation practices should do so in conjunction with an attorney in order to gain the protection of the attorney-client privilege.  Employers who review their payroll practices without conferring with an attorney may be forced to disclose any harmful findings to employees who complain of discrimination.
  • Eliminate any policies that prohibit or discourage employees from discussing or disclosing their wages – Policies that prohibit or discourage employees from discussing or disclosing their wages are common, so any employer that still maintains such a policy should discontinue it prior to January 1, 2016.

The California Fair Pay Act increases the importance of being alert to differentials in pay potentially attributable to sex.

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