October 23, 2018
According to the Equal Employment Opportunity Commission (EEOC), compensation discrimination is still a very real workplace problem. The EEOC has comprehensive guidelines to assist employers in complying with federal equal pay laws. There is also a California Equal Pay Act, which was amended in 2015 and 2016 to strengthen its requirements.
For both federal and California equal pay laws, the “wage rate” includes the salary paid and other forms of compensation and benefits. However, the form of compensation must also be gender-neutral: for example, an employer cannot pay male employees a higher hourly rate while periodically paying female employees a bonus to attempt to equalize their pay.
Under either federal or California laws, employers can justify disparate pay rates by showing a bona fide factor other than being in the protected class. In addition to having a bona fide factor for differing wage rates, the employer must also show that the bona fide factor was applied reasonably, relates to job performance, and accounts for the entire pay difference.
Recent Development: On April 9, 2018, the Ninth Circuit (federal court of appeals) ruled that an employee’s prior salary does not justify a pay difference, because using a prior salary to determine present salary may perpetuate improper discrimination of the past, though it might appear to be a gender-neutral, “objective” factor. [Rizo v. Yovino (2018) 887 F.3d 453.] By that ruling, the federal equal pay law now corresponds with California’s existing requirement that prior salary cannot justify different wage rates.
Federal Equal Pay Act: Under the federal Equal Pay Act, an employer cannot pay different wage rates, based on the gender of employees, where those employees perform jobs that require substantially equal skill, effort and responsibility and that are performed in the same workplace under similar working conditions. If there is such a wage rate inequality, employers cannot reduce the wages of any gender to eliminate the difference.
What factors should employers consider?
The EEOC says that employers should consider the following factors when analyzing whether jobs are similar:
1. Skill: This is the experience, ability, education and training required for the job. For example, a dishwasher who has a master’s degree is not entitled to any greater compensation than a dishwasher without a master’s degree, since a master’s degree is not required for the job.
2. Effort: This is the amount of physical or mental exertion needed. If a particular job involves more physical or mental exertion than another, it is appropriate for that job to provide better compensation.
3. Responsibility: This is the degree of accountability the job requires. For example, a female employee who works without supervision, exercises supervisory functions, or has an impact on the employer’s business is entitled to more compensation than her male counterpart who does not have this degree of responsibility. Note: Job titles are not definitive. Giving a male employee a higher title does not justify giving him more compensation, if he is doing the same work as female employees who are paid less compensation.
4. Working Conditions: This includes the job’s environmental surroundings (such as heat, cold, or noise) and any hazards inherent to the job.
California Equal Pay Act: Similar to federal law, the California Equal Pay Act requires not “equal pay for equal work” but equal pay for work that is substantially similar when viewed as a composite of skill, effort, and responsibility. However, unlike the federal equal pay law, the state law does not require that the employees who are being compared all work at the same establishment or under the same working conditions. Also, the California Equal Pay Act protects the categories of gender, race, and ethnicity, whereas the federal Equal Pay Act addresses only gender-related pay differences.
The California Equal Pay Act also makes it illegal to retaliate against employees who seek to enforce the law, or who seek to prohibit employees from discussing or inquiring about their co-workers’ wages.
As part of the California Equal Pay Act, California employers must maintain wage and other employment-related records for three years.
Risks for employers under either the federal or California Equal Pay Act: It is important to understand the compensation rules because wage discrimination claims can be very expensive. Besides a pay increase, employees may be entitled to twice the amount of the differential in back pay, which includes salary, bonuses and pension contributions, plus attorneys’ fees and sometimes even punitive damages.
Risks for employers under other laws: While the federal and state Equal Pay Acts prohibit employers from paying less wages to employees of any gender who perform comparable work, there are also other laws which prohibit employers from basing compensation on an employee’s gender, race, national origin, religion or sexual orientation. Paying workers who are outside a protected class more than workers within the protected class, for performing comparable work, is illegal. Also illegal is wrongfully failing to promote workers in protected classes.
Need more information?
ESKRIDGE LAW may be contacted by phone (310/303-3951), by fax (310/303-3952) or by email (geskridge@eskridgelaw.net). Please visit our website at eskridge.hv-dev.com.
This article is based on the law as of the date posted at the top of the article. This article does not constitute the provision of legal advice, and does not by itself create an attorney-client relationship with Eskridge Law.