What you need to know about California’s new wage-equality law

Gov. Jerry Brown this week signed a groundbreaking bill intended to close the wage gap between men and women.

Called the Fair Pay Act, the new law will expand previous protections for gender equality in wages by barring companies from paying employees less than those of the opposite sex for “substantially similar work,” even if their titles are different or they work at different sites.

A female housekeeper who tidies hotel rooms, for example, may challenge higher wages paid to a male janitor who cleans the lobby and hallways. Similarly, a female manager of a retail store could challenge a male manager’s higher pay, even if they work at different locations.

There are no exemptions for small companies with few employees.

Here’s what you need to know about the new law.

Why is this important?

Although California law has prohibited gender-based wage discrimination since 1949, that protection only applied to employees who held the exact same jobs. Companies have managed to skirt the law over the years, legal experts say, by giving people different titles or placing them in different offices, even if they perform the same job functions.

An important aspect of the new law also narrows the reasons that companies can give for paying men and women differently. Under the measure, exceptions that still allow for a wage differential include seniority, merit (such as superior performance or productivity) and qualifications, including education, training or experience.

That should help prevent wage discrimination by companies that in the past have explained away inequalities with reasons that were not related to gender but also not necessary to the business.

“Now it won’t be enough for employers to say, ‘I am an old friend of Joe, and that’s why he makes more, or we went golfing together,’” said Fatima Goss Graves, senior vice president of program at the National Women’s Law Center.

“This is really critical, “ she added. “Under most state laws and under federal law, there is vague language. You have had courts say, the fact they are pals, you can pay more.”

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FOR THE RECORD

2:35 p.m: A previous version of this post misspelled Fatima Goss Graves’ first name as Satima.

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What changed about wage transparency?

The law also strengthens protections for employees who inquire about or discuss their own pay or that of their co-workers. As in, they can’t be fired or otherwise silenced for asking questions about what others make, although employers aren’t required to provide that information.

Those protections are critically important, legal experts said, because pay discrimination often occurs under a cloak of secrecy. Unless women start inquiring about what their male counterparts make, they said, it can be hard to know if there is even a problem.

It’s an area in which several states have made strides in recent years. Two years ago, only six states had laws requiring pay transparency, Graves said. That will climb to 12 states if New York Gov. Andrew Cuomo signs a law with a transparency provision, she said.

What can women do if they suspect unequal pay?

The law will be enforced by the state Division of Labor Standards Enforcement, which decides wage claims and investigates discrimination complaints. An employee can file a complaint with the agency, which will investigate while keeping the worker’s name confidential. If a claim is valid, the Division of Labor Standards Enforcement will request wages on the employee’s behalf.

An employee can also file a lawsuit directly through the California Superior Court. Legal experts say such claims now have a higher chance of going to a jury. In such a lawsuit, the worker must first prove there is a wage difference. Then the employer will be given an opportunity to argue there is a legitimate reason for that gap. The worker then will get a chance to dispute that claim.

How are companies reacting?

Larger companies, who may be most vulnerable to litigation with thousands of employees and multiple locations, have already started reaching out for advice about complying with the law, said Todd Scherwin, regional managing partner at Fisher & Phillips, which specializes in labor issues.

Some are already crunching the numbers to see if they have a pay problem, Scherwin said. More proactive clients, he said, may try to quickly repair any disparities when it comes time to give raises.

Although some companies may opt to give raises or start new female employees at higher salaries, a number of advocates for workers are skeptical that many businesses will comply without employees filing complaints or lawsuits.

There will likely be a jump in litigation after the law goes into effect Jan. 1, legal experts said.

“I don’t think because this law is on the books, every corporation is going to suddenly do the right thing,” said Steve Smith, spokesman for the California Labor Federation. “A lot of people are going to have to resort to litigation or rely on the labor commissioner.”

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