Pay equity and transparency laws are being considered within the United States and by many countries. For example, internationally, Europe is reviewing a potential law requiring all wages to be published, Iceland requires companies to prove pay equity since 2018, and a similar law in Canada has passed for employers with 10 or more employees. Here in California, employers face a number of regulations under California and Federal law pertaining to employees’ ability to discuss wages, prohibition on salary history inquiries, the nation’s first “pay transparency” requirement, and equal pay requirements. Here is a summary five critical equal pay laws California employers must understand:
1. Right for employees to discuss pay.
Employers cannot limit employee’s discussion of their wages and workplace environment. For example, employers cannot prohibit employees from discussing or disclosing their wages, or for refusing to agree not to disclose their wages under Labor Code Sections 232(a) and (b). In addition, employers cannot require that an employee refrain from disclosing information about the employer’s working conditions, or require an employee to sign an agreement that restricts the employee from discussing their working conditions under Labor Code Section 232.5.
2. Employers may not ask applicants about prior salary.
Effective January 1, 2018, Labor Code section 432.3 prohibits California employers from relying on salary history information of an applicant in determining whether to make an offer to the applicant, and in determining the pay to offer. The law applies to all employers, regardless of size. Employers may not seek salary history information, which includes compensation and benefits, about the applicant.
In addition, upon a reasonable request, an employer must provide the “pay scale” for the position to an applicant. California was the first state in the nation to require this “pay transparency” disclosure. However, nothing in the law prohibits employees from voluntarily disclosing salary history to a prospective employer. Finally, an employer may ask an applicant about their salary expectations for the position, which is different than asking the applicant about earnings in the past.
3. California’s Equal Pay Act (EPA).
California’s Equal Pay Act, Labor Code section 1197.5, is directed at ensuring equal pay across genders and race. The law became effective January 1, 2016. While it was illegal to pay employees different wages based upon their gender or race already under California law, this law expanded the protection to workers who do “substantially similar” work. If challenged, employers can justify different pay if the employer can show it is based on one or more of the following factors:
- A seniority system
- A merit system
- A system that measures earning by quantity or quality of production
- A bona fide factor other than sex, such as education, training, or experience.
The law also requires that employers maintain records of the wages and wage rates, job classifications, and “other terms and conditions of employment of the person employed by the employer” for three years.
The statute of limitations requires that a plaintiff bring a case no later than two years after the cause of action accrues, however, if the violation is “willful” a three year statute of limitations applies.
Employees who bring a lawsuit under the law can recover the balance of the wages, including interest thereon, and an equal amount as liquidated damages, costs of the suit and reasonable attorney’s fees, notwithstanding any agreement to work for a lesser wage.
The law also prohibits employers from restricting employees from disclosing their wages, discussing the wages of others, inquiring about another employee’s wages, or aiding or encouraging others to exercise their rights under the new law.
4. Fair Employment and Housing Act.
The Fair Employment and Housing Act (FEHA) applies to public and private employers. FEHA prohibits discrimination of applicants and employees for employers with five or more employees based on a protected category, such as race, religion, or gender. Therefore, FEHA prohibits employers from paying employees differently based on a protected category. Unlike the Fair Pay Act, FEHA requires the employee to prove discriminatory intent.
5. The National Labor Relations Act.
The National Labor Relations Act (NLRA) protects employees to discuss wages and working conditions by providing employees with the right to discuss the terms and conditions of their employment with other employees. The NLRA can apply to workplaces that are not unionized and protects employees who are not involved in a union if they are involved in a “concerted activity.” Concerted activity includes discussing wages, benefits, and other working conditions.