CA Governor Signs New Equal Pay Law

The California Legislature has turned its attention to anti-discrimination law: equal pay.  Now, who is against equal pay?  If you raised your hand, you violated at least four laws that already existed before Jerry Brown signed SB 358 (text is here).  Four laws?   At least.

1. Title VII of the Civil Rights Act of 1964 does not allow employers to set pay based on sex (or race or other protected criteria). So, if a restaurant employer paid female servers  $0.50 per hour less than male servers, that would violate Title VII absent a "legitimate, nondiscriminatory business reason."  The workers must be "similarly situated."

2. The California Fair Employment and Housing Act is analogous to Title VII.

3.  The federal Equal Pay Act of 1963 (here)  (yes, enacted a year earlier than Title VII) provides:

(1) No employer having employees subject to any provisions of this section shall discriminate, within any establishment in which such employees are employed, between employees on the basis of sex by paying wages to employees in such establishment at a rate less than the rate at which he pays wages to employees of the opposite sex in such establishment for equal work on jobs the performance of which requires equal skill, effort, and responsibility, and which are performed under similar working conditions, except where such payment is made pursuant to (i) a seniority system; (ii) a merit system; (iii) a system which measures earnings by quantity or quality of production; or (iv) a differential based on any other factor other than sex: Provided, That an employer who is paying a wage rate differential in violation of this subsection shall not, in order to comply with the provisions of this subsection, reduce the wage rate of any employee.

4. And the California Labor Code, section 1197.5  already says:

1197.5. (a) No employer shall pay any individual in the employer's employ at wage rates less than the rates paid to employees of the opposite sex in the same establishment for equal work on jobs the performance of which requires equal skill, effort, and responsibility, and which are performed under similar working conditions, except where the payment is made pursuant to a seniority system, a merit system, a system which measures earnings by quantity or quality of production, or a differential based on any bona fide factor other than sex.

That said, and dissatisfied with the "wage gap" that exists between the wages earned by all men and all women in all jobs (which has nothing to do with the equal pay laws), the Legislature has  modified section 1197.5, intending to strengthen it.

Here is the text of the new law's equal pay provisions:

1197.5. (a) An employer shall not pay any of its employees at wage rates less than the rates paid to employees of the opposite sex for substantially similar work, when viewed as a composite of skill, effort, and responsibility, and performed under similar working conditions, except where the employer demonstrates: 

(1) The wage differential is based upon one or more of the following factors:
  (A) A seniority system.
  (B) A merit system.
  (C) A system that measures earnings by quantity or quality of production.
  (D) 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 purposes of this subparagraph, “business necessity” means an overriding legitimate business purpose such that the factor relied upon effectively fulfills the business purpose it is supposed to serve. This defense shall not apply if the employee demonstrates that an alternative business practice exists that would serve the same business purpose without producing the wage differential.
(2) Each factor relied upon is applied reasonably.
(3) The one or more factors relied upon account for the entire wage differential.

The key changes are:

- "substantially similar" work rather than equal work.  What does "views as a composite of skill, effort, and responsibility" mean?  This will be the subject of litigation. 

- the employee need not compare herself to others only within the same location, but may look to other job sites.  This change likely expands the new law beyond all four laws discussed above. When employers have multiple facilities and pay different rates based on location, this section could result in claims of pay disparity.  It is still lawful to do pay geographic differentials as far as I know. But employers will have to ensure that wage differentials based on geography are applied equally and do not create sex-based disparities.

-  the employer has to prove that wage disparities based on factors "other than sex, such as education, training or experience" are job-related, consistent with business necessity, and that the employee cannot prove a less discriminatory alternative.

- the court / jury gets to decide if the employer's reason for wage disparities are "reasonable."  

- the employer must prove the entire wage disparity is due to one or more of the defenses.

Other major changes:

 - Recordkeeping under this section goes from 2 years to 3.

-  It is already the law (in the Labor Code, even) that an employer cannot prohibit an employee from disclosing her own wages or discussing wages at work.  But this new law prohibits employers from preventing employees from "inquiring about another employee's wages" or "aiding or encouraging any other employee to exercise his or her rights under this section."  However, the new law says that it does not require anyone, including the employer, to disclose others' wages.  There is no exception for payroll or HR workers who may "discuss the wages of others" under this new law.  So, can the payroll manager chat with Sally about Bob's pay?  It also will be interesting to see if this law is preempted by the National Labor Relations Act, which also covers this area. 

- New private rights of action and remedies for violations. However, these existed in one form or another under the old laws as well.

Effective date and final thoughts:

This law takes effect on January 1, 2016.

Employers will have to revise payroll and confidentiality policies before then. It will also serve employers well do analyze compensation systems to ensure that wage disparities are justified in accordance with the defenses stated above.

Oh, and this law will do little to nothing to address the "wage gap" that you may have read about, or heard Patricia Arquette discuss at the Oscars.  That wage gap is a function of the average wage paid to women for all jobs compared with the average wage paid to men.   It's not a comparison of men and women doing the same job for the same employer.

If the politicians want to pass a law to address the overall wage gap and stop using it as a political talking point, they can do so.  But they will have to pass a law that sets wages for male-dominated occupations lower, set wages for female-dominated occupations higher,  and/or somehow balance the mix of males and females in each job category.  I have to go now.  I have an appointment in Room 101.

Finally finally, I think the law actually has a typo in it.  The usual way one refers to the commencement of the statute of limitations is when the cause of action "accrues."   This law reads, at least on the internet, and as of right now:

A civil action to recover wages under subdivision (a) may be commenced no later than two years after the cause of action occurs.

(emphasis mine).  I make typos too.  But I don't pass landmark legislation that affects millions of Californians.

Pot Pourri of Recent Cases I missed

There have been so many recent employment law decisions that I can't long-form blog them all.  So, here's a quick roundup of three recent, significant rulings -

Don't miss Serri v. Santa Clara University opinion here.  This case is a defense lawyer's summary judgment go-to. Of note, the court handled a number of claims that are rarely seen (such as defamation by self-compelled publication, intentional interference, and the Labor Code's equal pay law. Here are some of the highlights:

- Upholds denial of extension to file opposition to motion for summary judgment.

- Affirms summary judgment against discrimination, retaliation and wrongful termination claims.  Good analysis of the employee's burden of establishing "pretextual" reason for termination.

- Upholds summary judgment on a national origin harassment claim because the alleged comments were not severe or pervasive.

- Agrees that the trial court properly adjudicated the plaintiff's claim under the state Equal Pay Act (Labor Code section 1197.5). The court held the plaintiff did not establish the proper "comparators" to establish she was paid less than someone performing substantially equal work.

- Rare bird:  Upholds summary judgment against the plaintiff's claim of breach of employment contract. The court held that the university had "good cause" to fire Serri as a matter of law.

- Affirmed summary judgment on the plaintiff's defamation claim, including "compelled self-defamation."  The court held that all statements were true or privileged.

- Affirmed summary judgment on an intentional interference with prospective economic advantage claim.

*****

Ruiz v. Affinity Logistics, opinion here is the Ninth Circuit's second pass on an independent contractor v. employee analysis for delivery drivers. The court reversed the district court and held that  the delivery drivers were mis-classified:  "Affinity retained absolute control over drivers’ rates, payment, routes, schedules, trucks, equipment, appearance, decision to hire helpers, choice of helpers, and the right to deal with customers."  Thus, the court held, the most important factor under the Borello analysis—right to control—indicates overwhelmingly that the drivers were Affinity’s employees."  Close case, right? 

*****

Anderson v. City and County of San Francisco, opinion here, is another unusual case, testing out a "bona fide occupational qualification" defense under Title VII of the Civil Rights Act of 1964.  San Francisco's jail implemented a policy of prohibiting male guards from supervising female inmates.  The Sheriff articulated four reasons: "(1) to protect the safety of female inmates from sexual misconduct perpetrated by male deputies, (2) to maintain the security of the jail in the face of female inmates’ ability to manipulate male deputies and of the deputies’ fear of false allegations of sexual misconduct by the inmates, (3) to protect the privacy of female inmates, and (4) to promote the successful
rehabilitation of female inmates."  Guards sued, alleging they were denied promotional opportunities, overtime, and other harms because of the restriction.  Reversing the district court, the Ninth Circuit held that the plaintiff was entitled to a jury trial on whether the policy violated Title VII.  The Court explained that a BFOQ is narrow and requires the defendant employer to prove specific issues as an affirmative defense. Because the city failed to do that, the city was not entitled to judgment as a matter of law.  The "common sense" assumption that females should be supervised by females to avoid sexual contact, invasions of privacy, etc. are not enough.

 

Lily Ledbetter "Fair Pay" Act

Ledbetter v. Goodyear was one of those Supreme Court decisions that galvanized politicians, activists, etc. and became a proxy for complaints about "conservative" judges. We posted about that case here. We wrote an article about it here.

The opinion simply held that Title VII discrimination claims apply what's called a "statute of limitations." The "statute of limitations" protects employers from old claims. Claims that cannot be defended because records are gone, witnesses are dead or moved away, etc. It also protects defendants when plaintiffs "sit on their rights" and wait too long to prosecute their claims. By the way, Title VII indeed contains a statute of limitations. The dispute was over how it was applied.

Ledbetter had an Area Manager job with Goodyear for almost 20 years. Over a period of 15 years, her pay slipped as compared with other males. She finally sued for sex discrimination in her compensation under Title VII and the Equal Pay Act. The court held that the claims were time barred, because the allegedly discriminatory decisions to set her compensation were made outside the limitations period. But Ledbetter argued that every time she was paid, it was a new discriminatory act. As if the payroll coordinator knew how her wages were set. Anyway, the Court decided that her claims were time barred because none of the discriminatory decisions occurred within the 300 day limitations period that applies.

The decision hardly broke new ground. But it created a political firestorm, maybe because there was a presidential election campaign going on? Nah. But - but - Ms. Ledbetter spoke at one of the national party political conventions this year. Shhh.

Anyway, new administration, new laws. The Lily Ledbetter Fair Pay Act will make all compensation-based discrimination claims timely as long as one paycheck issued under the discriminatory practice falls within the limitations period. Ripple effects? Settlements, documentation and review of compensation decisions, pay equity studies.... the mind boggles.

Here's the text of the Act, which signed on 1/29/09. Oh its effective date? May 26, 2007 - the day the Supreme Court issued its decision. So, it is retro, at least as to pending cases.

Anyway, this will help you take your mind off Ms. Ledbetter and her new law: EFCA can't be far behind!

Greg