In this episode of The Workplace podcast, CalChamber employment law expert Matthew Roberts sits down with Bianca Saad, CalChamber vice president of labor and employment for content, training and advice, to discuss the legal requirements of the California Fair Pay Act and provide best practices for improving compliance.
California Fair Pay Act
Commonly referred to as the Equal Pay Act, the California Fair Pay Act prohibits paying employees less than others of the opposite sex or another race, ethnicity or other protected category for substantially similar work.
“Substantially similar” refers to work that is performed using similar skill, effort, responsibility and working conditions, Saad explains. The job title or function does not have to be the same; rather it’s the work involved that is key.
Another component to the Fair Pay Act is that employers cannot have workplace rules that prohibit employees from disclosing their wages nor prohibit employees from asking or discussing wage rates with coworkers.
And lastly, Saad says, employers cannot prohibit employees from exercising their rights under the Equal Pay Act.
Bona Fide Factors
The Equal Pay Act does not require that everyone performing substantially similar work be paid the same. Saad explains that employees can be paid differently for substantially similar work, but the reason for the disparity in pay must be based on a bona fide factor other than sex, race or ethnicity. If relying on bona fide factors, employers will need to be able to explain and demonstrate the justification for the pay disparity.
Bona fide factors could be a seniority system, merit system, education, training, experience, geographic location and even shift times. For example, some companies have pay differentials that pay night shifts more because those shifts are typically less desirable, and the higher pay attracts workers.
Whatever rules employers decide upon, they should be careful to apply rules uniformly, Saad stresses.
One compliance best practice is audits.
Saad says that auditing can include auditing your own organization’s practices around pay and compensation decisions, and conducting a true compensation audit, meaning doing a thorough audit of what individuals are making to find pay disparities.
Audits around actual pay can be tricky, so working with legal counsel is going to be imperative as there will be concerns like maintaining confidentiality, privilege, etc., Saad advises. There are benefits, however, to these audits because if disparities are found, then the employer can remedy them.
Auditing an organization’s practices is a great place for any organization to start because the purpose is to evaluate what the organization is doing, who’s making the compensation decisions, and what criteria are being relied upon. If employers find that there are inconsistencies in how things are done, it might indicate that there could be problems down the road, Saad points out.
Another best practice is to look at your company’s job descriptions.
Job descriptions play an important role, so companies want to ensure that job descriptions are accurate and up to date, Saad says. The job descriptions should reflect appropriately what individuals are doing so that the company knows that it is comparing the right people.
Documentation is one of the most important things an employer has as memories fade and stories change, Roberts says. What are the kinds of documentation that employers should keep in place to ensure that they’ve got good compensation decisions that are justified, Roberts asks Saad?
For documentation purposes, job descriptions, performance reviews and documentation from the hiring process that would substantiate bona fide factors are key. Pay increases should be documented as well, including the reasons behind the pay increase. This is “so that when you’re comparing, and you can see a trend on one side differing from a trend on another, you can…show those justifications as to why those pay disparities exist,” Saad says.
It is very important that a company’s decision makers understand the laws around equal pay and what the obligations are, Saad emphasizes.
One obligation that California employers have now is that they must provide a pay scale of all employees upon request. So, it’s important that not just human resources professionals know about these requirements. Supervisors and managers must know what to do if they’re handed a request too, she says.