For Bosses in California, a Tough New Fair-Pay Law
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Starting January 1, 2016, California employers will face the nation’s strictest fair-pay law.
Under the state’s Fair Pay Act, which aims to close the wage gap between men and women, employers will have to be able to prove they pay both genders equally for "substantially similar" work.
The rules have spurred employersto reassess the way they pay and classify workers. Some are puzzling over what "similar" means in legal terms, such as whether a marketing manager and a supply-chain manager have roughly equivalent jobs. Others are conducting complex audits of their payrolls, seeking to uncover any disparities.
The law makes it easier for workers to challenge the fairness of their pay and also nudges employers to fix pay issues before complaints arise. Those who violate the law could be on the hook for back wages and interest, plus an equal amount in additional damages. According to data cited in the legislation, women in California earn an average 84 cents for every dollar earned by men.
A handful of California companies, some in Silicon Valley, have been analyzing their pay practices for a while, driven not by the law but by concerns about gender bias in the tech industry.
Since 2013, networking-equipment maker Cisco SystemsInc. has had a unit that continuously reviews employee salaries to ensure that men and women are being paid fairly. The initial gender gap in salaries was "a very small percentage," and Cisco adjusted pay accordingly, a company spokeswoman says, but she couldn’t specify how much it spent in the process.
Salesforce.com Inc. began looking into pay equity earlier this year after two high-ranking women, including human-resources chief Cindy Robbins, suggested to Chief Executive Marc Benioff that the online software vendor examine its practices.
An initial assessment "didn’t find a lot of disparity," Ms. Robbins said in an interview this fall. But the company spent $3 million this year raising the salaries of some women and a few men to reach pay parity.
Assessing pay is difficult, according to statisticians who specialize in pay audits, since most HR systems don’t capture all the information needed to group similar jobs. In addition, they typically lack enough data on individual workers to understand whether legitimate factors—such as seniority, experience, or education—account for differences in pay.
"It takes time to document these differences and confirm there are bona fide factors other than sex driving any kind of pay gap," said Elaine Reardon, a director at Beverly Hills-based Resolution Economics, which helps companies conduct pay audits. She estimated the process can take three to six months.
Such audits may encourage employers to standardize the way they set pay, instead of deciding it, as many companies do, on a case-by-case basis, said Caroline Simard, leader of the diversity and workplace transformation practice at Exponential Talent LLC, a Bay Area consulting firm. "Standardization can be really good for more equality," said Ms. Simard.
The firm helped Gap Inc. analyze its pay data this year to verify what an internal audit found in 2014, that the retailer pays men and women commensurately.
Gov. Jerry Brown signed the Fair Pay Act into law in October, expanding a 1963 federal regulation prohibiting companies from paying men and women differently for equal work. The "similar work" provision is important, legal experts say, because the "equal work" rule was very narrow, allowing employers to use any differences in job responsibilities as a rationale for pay disparities.
"Most differences in pay scales between men and women aren’t because they’re in the same job, but because they’re in female- or male-dominated job categories," said Martha West, professor of law emerita at the University of California, Davis, School of Law.
Still, the law leaves open the question of which jobs can be considered similar. Is a women’s soccer coach similar to a men’s soccer coach? An assistant manager of HR, and one in accounting?
"It will take several court decisions or agency decisions to work out how broadly the term ‘similar’ will be defined," said Ms. West.
The law shifts the burden of proof onto employers, rather than individual workers, so companies will have to prove that they pay equitably if an employee brings a complaint. The California Labor Commissioner’s Office, also known as the Division of Labor Standards Enforcement, will oversee compliance.
The law applies to all workers in California, regardless of their employer’s size or where it is based, said Gary Gansle, a partner in the Palo Alto office of law firm Squire Patton Boggs LLP.
Managers of small businesses and companies with just a handful of workers in the state say the law is prompting discussion and some action. "We haven’t planned on an audit yet, but it’s probably something we’d want to plan in the very near future," said Jason Leverant, president of AtWork Group, a national staffing agency based in Knoxville, Tenn., with nine branches and about 30 corporate employees in California.
The firm’s outside counsel in California recently gave an employment-law update for AtWork’s local department heads and divisional leaders, and pay legislation was covered. "We want to make sure our people are aware of this. It can get pricey if you don’t comply," Mr. Leverant.
The new law bars employers from punishing workers who discuss salaries with colleagues. That’s a potentially significant restriction, since it could spur more workers to talk about and challenge pay disparities internally before pursuing complaints or litigation, said Ms. West, the law professor.
Women need to "talk to each other and talk to their male colleagues," she said. "And if women start organizing at work, that will put pressure on employers to correct differences before anyone has to sue."
News Release provided by:
Laura Weber
Georgia Wells contributed to this article.
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