Regulations

California Continues to Map the Frontier of Pay Equity

In the absence of federal legislative activity addressing pay equity, states continue to take matters into their own hands. (See my blog on the federal Paycheck Fairness Act here). Few states are as proactive as California. With three new bills passing the Senate and Assembly in June, the Golden State aims to tackle various elements of the growing national concern over pay equity.

SB 1284 – Pay Data Reporting

In August 2017, the federal Office of Management and Budget stayed the implementation of a new requirement for employers to submit pay data along with their EEO-1 Reports. SB 1284, if signed into law, will place a similar pay data burden on private California employers with 100 or more employees. Notably, employers with multiple establishments will be required to submit a report for each establishment, as well as an aggregated report for all establishments.

What does the pay data report require?

Specifically, SB 1284 requires a yearly pay data report submitted to the state Department of Industrial Relations (DIR) due before October 1, 2019, and before October 1 of each year thereafter. The proposed pay data report would include employee demographic data, such as: the number of employees by race, ethnicity, and sex, paralleling the 10 EEO-1 job categories. Compensation data would include the number of employees by race, ethnicity, and sex, whose earnings fall into pay bands from the United States Bureau of Labor Statistics in the Occupation Employment Statistics survey (a semi-annual mail survey of non-farm establishments).

Proponents of measures like SB 1284 point out that transparency creates a culture of fairness. They highlight the case of Lilly Ledbetter, namesake of the Lilly Ledbetter Fair Pay Act, who for years was unaware that she was paid less than her male peers in the same position. Critics of SB 1284 cite the risks of aggregated data, which could be used improperly to create the illusion of pay disparities. (Read more about our coverage of the importance of data cleansing). They also note that the bill, as written, could lead to broad disclosure of reported data. The text of SB 1284 provides that the DIR may make the pay data reports available to the state Department of Fair Employment and Housing (DFEH) which in turn may “develop and publicized aggregated reports” based on the pay data, so long as the reports are reasonably calculated to prevent association with an individual business or person.

AB 2282 – Clarifying the Salary History Ban

California, among other states, currently prohibits employers from relying on prior salary history to determine whether to make an offer of employment or to justify what to pay a new hire. AB 2282 aims to clarify employers’ obligations under the salary history ban in three important ways. First, the bill specifies that the salary history ban does not prohibit employers from inquiring into the applicant’s salary expectation for the position being applied for. Second, current law requires an employer, upon reasonable request, to provide the “pay scale” for a position to an “applicant” applying for employment. Under SB 2282, “pay scale” would be defined as a salary or hourly wage range; “applicant” would mean anyone applying for employment that does not currently work for the employer in any capacity. Third, and perhaps most importantly, SB 2282 would authorize compensation decisions for current employees based on current salary so long as any pay disparities resulting from the decision can be justified by specific “bona fide” factors, such as a seniority system, merit system, or knowledge, training or experience. In sum, SB 2282 would provide more guidance to employers under recent pay equity legislation.

SB 1252 – Pay Statements

Current law requires certain employers to grant current and former employees the opportunity to inspect or copy documents containing their pertinent employment information, including earnings, upon reasonable request. This bill would clarify that the right to copy relevant employment records includes the right of receipt of copies of those records, upon reasonable request. Penalties of $750 would apply to employers who refuse to grant a reasonable request within 21 days.

The Bottom Line

None of these bills have been enacted into law—yet, so they contain no affirmative obligations on employers. However, should one or all of these bills be signed by the Governor, employers will need to update their policies and procedures accordingly. In particular, employers with over 99 employees should monitor the progress of SB 1284, which has the potential to create substantial reporting obligations.

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California Continues to Map the Frontier of Pay Equity
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California Continues to Map the Frontier of Pay Equity
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In the absence of federal legislative activity addressing pay equity
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First Capitol Consulting.Inc
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