2015 California Labor And Employment Legislative Update: Newly Enacted Employment Legislation

The California Legislature's efforts to expand the reach and scope of California employment statutes continue unabated. In most instances, its efforts were endorsed by Governor Jerry Brown. In September and October 2015, the governor signed more than a dozen of these bills into law. Most notable is the California Fair Pay Act, which amends the Labor Code to require equal pay for employees performing "substantially similar" work regardless of gender, strengthens anti-retaliation protections for employees seeking wage information, and extends employers' recordkeeping obligations. The California Fair Pay Act goes into effect at the beginning of 2016. Employers should consider a review of their current job titles and positions, assess which of those positions may be deemed "substantially similar," and compare their associated rates of pay. Governor Brown also signed bills, inter alia, clarifying California's mandatory sick leave law, establishing an ability to "cure" limited paystub violations, and refining compensation requirements and meal period standards for certain employees.

Unlike last year, Governor Brown did not sign every piece of legislation adopted by the Legislature. He vetoed a proposed prohibition on mandatory arbitration agreements, as well as bills aimed at restricting employers' use of employment status and salary information. It is expected that the Legislature will again seek to adopt these issues in 2016.


On October 6, 2015, Governor Brown signed into law the California Fair Pay Act, which amends Labor Code section 1197.5. The amendment is designed to strengthen the legal prohibition against differences in compensation based on sex. The Act is effective on January 1, 2016 and does not contain a retroactivity provision.

The text of the Act principally accomplishes three things: (i) it requires employers to provide equal pay to employees of opposite sexes for work that is "substantially similar" (rather than for work that is "equal"); (ii) it strengthens employee protection from retaliation for discussing or seeking wage information; and (iii) it extends certain recordkeeping requirements from two years to three years.

Broader Classification of Comparable Jobs

The Act prohibits paying employees of the opposite sex a lower wage or salary for "substantially similar work, when viewed as a composite of skill, effort, and responsibility." Previously, employers were required to provide equal pay between sexes only for "equal" work. Additionally, the assessment is now made in consideration of work performed under "similar working conditions," eliminating the prior rule that wages be compared only within the "same establishment." Accordingly, employers need to be able to account for, and may potentially be liable for, differences in compensation for work performed in different locations, if such work is nonetheless performed under "similar working conditions."

The law includes a burden-shifting provision. Faced with a prima facie showing of wage disparities, the employer may establish that wage differences between sexes are due to a seniority system, merit system, a system that measures the quantity or quality of production, or a "bona fide factor other than sex, such as education, training, or experience." The cited nondiscriminatory factor may not be based on or derived from a sex-based differential in compensation, must be job related, and must be consistent with a "business necessity" that is satisfied by the factor relied upon. An employee also may rebut an employer's justification of "business necessity" simply by demonstrating that an alternative business practice exists that would serve the same business purpose without producing the wage disparity. Each of these factors must be "applied reasonably," and together, the factors must account for the entire wage differential.

Potential liability for a statutory violation of this provision is the amount of wages denied to the employee by virtue of the violation, plus interest, plus that same amount in liquidated damages, plus costs and attorneys' fees. The statute of limitations is generally two years, but it is three years for a "willful" violation.

Anti-Retaliation Provision

The Act prohibits an employer from discharging or otherwise retaliating or discriminating against an employee for "any action taken by the employee to invoke or assist in any manner the enforcement of this section." Specifically, an employer cannot prohibit an employee from, or retaliate against an employee for: (i) disclosing the employee's own wages; (ii) discussing the wages of others; (iii) "inquiring" about the wages of others; or (iv) assisting others in exercising rights provided by the Act. The employer, however, is not obligated to disclose wage information.

This provision creates a private right of action with a one-year statute of limitations. The remedy for a violation of the retaliation provision is reinstatement, reimbursement of lost wages and/or benefits caused by the retaliation, interest, and other "appropriate equitable relief."

Extended Recordkeeping Obligation

The Act extends an employer's recordkeeping obligation from two years to three years.

Recommendations for Employers

Review Compensation Practices

Consult with counsel to identify categories of "substantially similar" jobs based on "skill, effort, and responsibility," including across different locations, and identify any wage discrepancies among men and women in those positions. Review internal and external job descriptions. First, consider determining how many men and women fit in each description and whether salary/wage differences between comparable jobs are based on distinctions in the work or if the positions might be considered "substantially similar." Second, if those descriptions do not adequately portray the content of those jobs, consider amending them to accurately highlight differences in the skill, effort, or responsibilities associated with each position. Review pay discrepancies among opposite-sex employees performing substantially similar jobs. Determine whether any disparities can be attributed to objective systems of seniority, merit, determinations of quality and quantity of production, or another bona fide factor other than sex, and document those determinations as appropriate. Review current salaries of employees and ensure that any differences between their salaries and the salaries of members of the opposite sex doing substantially similar work are not based upon factors that could themselves be gender-based considerations. Revise Policies and Update Training

Make sure supervisors and managers know they cannot prevent employees from discussing wages or inquiring about wages. Revise employee handbooks and other policy documents to remove policies prohibiting disclosure or discussion of wages. Develop a policy regarding whether or how wages should be disclosed upon request, accounting for employee privacy concerns. Remind managers and supervisors that there is no obligation to disclose information about wages. Train those in charge of compensation decisions regarding the new requirements of the Act. Encourage decision-makers to discuss and record factors supporting compensation differences consistent with the new law. Ensure whistleblower and anti-retaliation policies extend to employees asserting rights under the Act. Maintain records of wages and wage rates, job classifications, hiring and promotion documentation, time records, and records of other terms and conditions of employment for at least three years. Consider creating a system for filing internal complaints and develop a system for addressing the complaints to identify potential concerns quickly. WAGE STATEMENT VIOLATIONS: THE LEGISLATURE ENACTS A LIMITED RIGHT TO CURE

Governor Jerry Brown signed Assembly Bill 1506 on October 2, 2015, providing employers with a small measure of relief from the stringent requirements of California's wage statement law. Labor Code section 226(a) lists 11 items that must appear on employee wage statements (i.e., "pay stubs"). If one or more of these items is absent or is not accurate, the statute is violated. In addition, an employee suffering injury as a result of a knowing and intentional failure by an employer to comply with Labor Code Section 226(a) will be entitled to statutory penalties. Employees also frequently claim that they are entitled to penalties under the Labor Code Private Attorneys General Act ("PAGA") even in the absence of a showing of actual injury.

Before an employee or former employee can bring suit under PAGA, however, he or she must give both the employer and California's Labor and Workforce Development Agency ("LWDA") written notice of the alleged Labor Code violation. AB 1506 amends PAGA to include a limited right to cure when the violation alleged involves Labor Code sections 226(a)(6) and/or (8), i.e., when the paystubs are allegedly missing the inclusive dates of the payroll period, the employer's name, and/or the employer's address. The...

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