July 27, 2018 California’s Equal Pay Act is Amended . . . Again
Last week, Governor Brown signed into law Assembly Bill 2282, which was introduced in February 2018. The bill is another amendment to California’s Equal Pay Act, which has now been amended three times since January 1, 2016, when the Fair Pay Act expanded the law to apply to employees performing “substantially similar work” and limit the factors employers can rely on to justify pay disparities. The changes to the law take effect on January 1, 2019.
The new amendments are primarily intended to clarify the obligations imposed on employers by Assembly Bill 168, which took effect on January 1, 2018. AB 168 prohibited employers from asking job applicants for salary history information, and it also required employers to provide “applicants” with the “pay scale” for a position based on a “reasonable request.” Since AB 168 took effect, employers have struggled to interpret these requirements, including whether “applicants” included current employees, what information had to be included when providing the “pay scale,” and what constituted a “reasonable request.” AB 2282 addresses these questions by providing more details about employers’ obligations. Specifically, the new amendment provides:
- An “applicant” is an individual seeking employment, not a current employee.
- “Pay scale” is a salary or hourly wage range, and does not include bonuses or equity compensation.
- A “reasonable request” is a request made after an applicant has completed an initial interview with the employer.
The amendment also states what was previously understood: The ban on inquiring about an applicant’s pay history does not prohibit inquiries about an applicant’s “salary expectations.”
Finally, the new amendment drives home that employers cannot rely on prior salary – ever – to justify a pay disparity between employees performing substantially similar work. Existing law said employers could not rely on salary history information of an applicant as a factor to determine what salary to offer the applicant. Existing law also said employers could not use prior salary “by itself” to justify any disparity in compensation. The amendment removes the “by itself” limitation, and also adds a new sentence that says: “Prior salary shall not justify any disparity in compensation.” However, the amendment provides a slight exception for current employees, by providing: “Nothing in this section shall be interpreted to mean that an employer may not make a compensation decision based on a current employee’s existing salary, so long as any wage differential resulting from that compensation decision is justified” by the statutory factors of a seniority or merit system, a system that measures earnings by quantity or quality of production, or a “bona fide factor” other than gender, race or ethnicity, such as education, training or experience.
What This Means
This amendment provides employers with some additional clarity by better defining their obligations to provide pay scale information to applicants. The amendment also makes it clear that employers cannot rely on prior pay in initial salary setting, and cannot include prior pay even as one consideration in justifying a pay disparity between employees performing substantially similar work. Even though employers may make compensation decisions based on an existing employee’s current salary, employers still must be able justify any resulting wage differential based on factors enumerated in the statute. This means that employers must rely solely on these statutory factors, and never on prior pay, when explaining starting salaries or any pay differential between employees performing substantially similar work. Considerable uncertainty remains, however, over how narrowly courts will construe the statutory factors, especially a “bona fide factor other than gender, race or ethnicity,” which requires employers to prove an “overriding legitimate business purpose” and that the factor has been “applied reasonably.” It will take time for these questions to be answered by the courts.
This E-Update was authored by Fred Plevin. For more information, please contact Mr. Plevin or any other Paul, Plevin attorney by calling (619) 237-5200.