Human Capital Management Blog

Strategies for HCM Professionals

California Expands Their Fair Pay Act

When someone uses the term “wage gap”, we too often think only of the gender-based wage gap, without considering employees who are paid unfairly based on their race. Unfortunately, both types of wage gap still exist, meaning that the gap is even larger for women of color.

In an effort to close these gaps, California has recently expanded their Fair Pay Act. When the act was initially passed last year, it prevented employers from paying employees differently based on their sex. Effective January 1, 2017, the act will be expanded to also prevent pay disparity based on race and ethnicity.

Both protections rely on the definition of substantially similar work, which is assessed using a composite of skill, effort, and responsibility for jobs performed in similar environments. For example, the act would allow pay disparity for similar roles if the higher paid role involved working in a more physically demanding environment.

To maintain some flexibility for employers to reward their high performers, the act still allows for wage differentials as long as they are based on one of the following factors:

  • Seniority
  • Merit
  • Production quantity and/or quality
  • Education, training, or experience related to the position and consistent with business necessity

Further, companion legislation (AB 1676) prohibits employers from using prior salary to justify a pay disparity. However, it does not prohibit an employer from asking for salary history.

Prior to the updated act taking effect, employers must review and revise their pay policies and procedures to verify that they are compliant.

Want to Learn More?

You can read the full text of the legislation at the links below:

 

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