California Fair Pay Act

California passed a “Fair Pay Act” which prohibits employers from paying employees less than the rate paid to members of the opposite sex who perform substantially similar work. The California Fair Pay Act is effective January 1, 2016 and applies to all of an employer’s locations, even those locations outside of California.

The law provides that an employer cannot pay any of its employees wage rates less than the rates paid to employees of the opposite sex for substantially similar work, when viewed as a composite of skill, effort, and responsibility, and performed under similar working conditions. Differentials can be applied where the employer reasonably can show that the wage difference is based on

1. A seniority system.
2. A merit system.
3. A system that measures earnings by quantity or quality of production.
4. A bona fide factor other than sex, such as education, training, or experience. This factor can be used only if the employer demonstrates that the factor is not based on or derived from a sex-based differential in compensation, is job related with respect to the position in question, and is consistent with a business necessity.

The law prohibits employers from retaliating against employees who discuss salary or encourage others to file suit under the law. It also requires employers to keep records on wage rates, job classifications and other terms of employment for three years. 

Employers with a locations in California should be familiar with the new wage rules.