California is at the forefront of the push to close the wage gap between genders and address salary inequality. Senate Bill 1162 (SB-1162), was recently signed as a broad pay transparency and data reporting bill. SB-1162 makes it so employers must disclose the pay scale for any posted job listings. The motivation for this bill is to prevent employers from underpaying employees, establish pay equity, and stop the unfair wage gap.

This recent legislation is just one of many for the fight towards establishing equal pay for employees with the same job description or title regardless of age, race, gender, or disability. As employers, it is pertinent to pay your employees a fair and just wage that reflects their responsibilities. Failure to do so can result in hefty settlements from class action lawsuits and can hurt the well-being of your company. Here are the most important legal implications that you must adhere to in order to establish pay equity and avoid wage gap issues. 

Equal Employment Opportunity Commission

The California Equal Employment Opportunity Commission (EEOC) is responsible for enforcing laws that make it illegal to discriminate against employees on the basis of race, color, religion, sex, national origin, age, disability, or genetic information. Employers in California are required by law to comply with the EEOC’s regulations and to take steps to ensure that their employees are not subjected to discrimination. The following are strictly prohibited under EEOC regulation:

  • Publishing a job advertisement that states preference for or discourages someone from applying due to race, religion, gender identity, national origin, age, disability, or genetic information;
  • Recruiting new employees in a way that discriminates against them for the above discriminatory reasons;
  • Requiring information in the pre-employment process that does not pertain to an applicant’s qualifications for the position; 
  • Determining payment of wages or employee benefits based on the above discriminatory reasons. 

The best way to ensure compliance with the EEOC is to familiarize yourself with its regulations and maintain policies and procedures that prohibit discrimination and harassment in the workplace. You can find a full summary of prohibited employer actions on the EEOC website. 

Title VII of the Civil Rights Act

Title VII of the Civil Rights Act of 1964 is a federal law that prohibits discrimination in employment on the basis of race, color, religion, sex, or national origin and is enforced by the EEOC. Title VII applies to all employers with 15 or more employees, including state and local governments. It also applies to employment agencies and labor organizations. This legislation makes it illegal for employers to determine an individual’s compensation rates based on any discriminatory reasoning. It also applies to all other aspects of employment, including hiring, firing, promotion, and job training. Furthermore, it prohibits workplace harassment and retaliation against employees who report discrimination against themselves or others. 

As an employer, compliance with Title VII is of utmost urgency. Your employees may seek a jury trial for intentional discrimination, with compensatory and punitive damages up to the maximum limitations established by the Civil Rights Act of 1991. The value for the damages differs according to your number of employees. For businesses with: 

  • 15-100 employees, a maximum of $50,000;
  • 101-200 employees, a maximum of $100,000; 
  • 201-500 employees, a maximum of $200,000; 
  • <500 employees, a maximum of $300,000.

When it comes to how the settlement may be paid out, solutions of back pay, reinstatement, and retroactive seniority are available for all types of discrimination, including but not limited to those with intentional or disparate impact. 

Advancements to Support Women and Establish Pay Equity

In 2020, Governor Newsom passed Senate Bill 973 (SB-973) which required private employers that have 100 or more employees, and who are required under federal law to file an annual Employer Information Report, to submit a pay data report to the Department of Fair Employment and Housing which contains specified wage information. 

Building off of SB-973, Newsom signed SB-1162 and AB-1287 in 2022. The first bill requires salary transparency for job listings while the second prohibits the sexist “pink tax” on products marketed toward women. As an employer, you are obligated to offer equal employment, opportunity, and compensation to individuals of equal merit, skill, and seniority, regardless of gender. Furthermore, if your place of business sells gender products or products targeting a female audience, they cannot be priced higher than the equivalent products which are male-centric or unisex/ungendered. 

Previously, in reaction to increasing discrimination towards women in the workplace (especially in the technology industry), the California Equal Pay Act was updated in 2015. The act, which was first enacted in 1949 as a revolutionary measure to assuage gender-based wage discrimination, was strengthened with the addition of the California Fair Pay Act. The Fair Pay Act amended the law to make it illegal for employers to pay any of their employees at wage rates less than the rates paid to employees of another race or gender for “substantially similar work.” Furthermore, the Fair Pay Act both builds upon and clarifies the Equal Pay Act, removing legal loopholes and making it easier for businesses to understand the law while providing a way to establish consistency across equal pay lawsuits.  

California Equal Pay Act Under the Current Law

In 2017, the Equal Pay Act was amended to include race and ethnicity as protected groups. In 2018, the act was once again expanded to include public employees. These changes prohibit employers from asking potential employees their previous salaries upon which to build a salary range for the position they are seeking. 

As of 2022, recent updates to the Equal Pay act require that employers:

  • Provide equal pay for employees who perform “substantially similar work,” when considered as a composite of skill, effort, and responsibility.
  • Eliminate the requirement that employees who are being compared must work at the “same establishment.”

These updates prevent employers from unrightfully defending or justifying pay inequalities and require them to provide substantial evidence that does not lead back to the pay disparity due to gender. It also explicitly states that retaliation against employees attempting to ensure the enforcement of the law is illegal. This includes making it illegal for employers to prohibit employees from discussing wages. 

Currently, the only way for employers to overcome an Equal Pay Act claim by employees is if they can prove that the difference in wages or salary for “substantially similar work” is due to differences amongst the employees due to:

  • Seniority;
  • Merit;
  • level of productivity; and/or
  • A “bona fide factor other than sex, race, or ethnicity” (i.e. education, training, or experience).

Class Action Lawsuits for Enabling Wage Discrimination 

In recent years, several businesses have found themselves in hot water for wage discrimination with giant class action lawsuits. Here are a few examples: 

What This Means For Employers

The state of California is taking wage equality more seriously than ever, passing more and more laws to prohibit and limit discrimination while strengthening employee rights and protections. As an employer, you must remain up to date with current legislation regarding wages, payment data, and do your due diligence to be transparent with wages in all job postings moving forward. 

Are you confident that your business has all of the necessary agreements and precautions in place to safeguard you against class action lawsuits regarding pay equity? Contact our team today to protect your company or for a case evaluation. 

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