A number of California companies, especially in the tech industry are facing increased scrutiny over equal pay issues in recent years. While these types of claims have been hard to have certified as a class action on the federal level, some claims under California’s recent Equal Pay Act are seeing success. Here are five reminders that employers need to understand about California’s pay discrimination laws and the potential liability they carry:
1. The technology industry has been especially targeted in California for pay discrimination claims.
In June of 2021, a class action against Google alleging pay discrimination was granted class certification, and the case is likely to go to trial by the end of 2022. In 2020, a case against Oracle was also granted class certification. In May 2022, LinkedIn reached a settlement with the U.S. Department of Labor for $1.8 million for 686 female workers in California. The settlement covered LinkedIn’s engineering and marketing positions in San Francisco and its engineering and product positions in Sunnyvale.
Plaintiffs filed a class action and PAGA lawsuit against Sony Interactive Entertainment LLC, which produces the PlayStation, in May 2022. The lawsuit alleges that female employees were not equally compensated, were held back from promotions, or were denied promotions based on their gender. The lawsuit alleges violations of California’s Equal Pay Act, California’s Fair Employment and Housing Act (FEHA), failure to prevent and investigate discrimination, violation of California’s Business & Professions Code section 17200 (Unfair Competition), and claims under the Private Attorneys General Act.
2. California’s Equal Pay Act.
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 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.
3. Equal Pay Act claims do not require plaintiffs to prove discriminatory intent.
In granting class certification, the court in the Google case noted that the “EPA provides that ‘[a]n 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[.]’” Plaintiffs contend in the case that employees in the same job code perform substantially similar work, women in the same job codes are paid less, and Google does not have an affirmative defense to justify the pay discrepancy.
As the court noted in the opinion, “Since intent is not an element of a prima facie case under the EPA or a disparate impact theory under FEHA,” the evidence submitted by Google’s managers that they did not discriminate in their pay decisions “is irrelevant.”
4. California has many other laws prohibiting pay discrimination.
Effective on 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.
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. Any pay discrepancies based on gender violates FEHA.
In addition, 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.
5. New proposed legislation: AB 1162 for pay transparency.
As discussed above, Labor Code section 432.3 became effective on January 1, 2018, and prohibits California employers from asking applicants about prior salary history. Section 432.3 currently requires employers to provide applicants a pay scale “upon reasonable request.” It defines “pay scale” as “a salary or hourly wage range.” More information about Labor Code section 432.3 can be read here.
AB 1162 is a bill currently under consideration by the California state legislature that would amend Labor Code section 432.3 to, among other proposed changes, require employers who have 15 or more employees to publish a pay scale for a position in any job posting. In addition, employers would be required to maintain “records of a job title and wage rate history for each employee for the duration of the employment plus three years after the end of employment” and must make these open to inspection by the Labor Commissioner.