The headlines glared on March 27, 2019, as the House passed a long-awaited bill titled The Paycheck Fairness Act (“PFA”). The bill was intended to strengthen protections against gender-based wage discrimination. However, there is no reason for companies to institute wide spread panic just yet. The bill is awaiting a Senate vote, which is expected to be an uphill battle. Even in the event this bill eventually becomes a law, the ramifications for California employers will be minimal. California already has laws in place that are substantially similar to the PFA and business has not been shut down just yet. However, the possibility for women in all states to earn a paycheck equal to her male colleagues is electrifying.
In order to understand the PFA, its important to look at a brief history of equal pay in federal law.
Equal Pay Act of 1963
The Equal Pay Act of 1963 (“EPA”) prohibits employers from paying men more than women, unless they can show the men earned their higher salary through their own merits or seniority. An employee may prove a violation of the Equal Pay Act by demonstrating: “(1) the employer pays different wages to employees of the opposite sex; (2) the employees perform equal work on jobs requiring equal skill, effort, and responsibility; and (3) the jobs are performed under similar working conditions.” 29 U.S.C. § 206(d)(1) (2006).
Deficiencies of the EPA
The EPA has failed to prevent gender-based wage discrimination in the following ways:
- The EPA allows for only the differential amount of compensation for 180 days, without any penalties unless an employee can prove the violation was willful. This allows for very little incentive for a low-income worker to enforce her rights under the law.
- The EPA’s class action provisions require employees to opt in to participate in a class action suit.
- The EPA does not prohibit retaliation for discussing and/or sharing salary information with co-workers. This makes it difficult for employees to discover the discrepancy in pay. Workers are losing their rights to equal pay simply because they have no means to discover the discrepancy.
The Lilly Ledbetter Fair Pay Act
Due to the deficiencies in the EPA over the years, women discovered that they were earning far less than their male colleagues with similar experiences and job titles. For instance, Lilly Ledbetter, after discovering that male managers with less experience were earning more than she, sued her employer (Good Year Tire) under the Equal Pay Act. However, even though she was able to establish that she was denied equal pay under the law for many years, she was denied more than a pittance because the statute of limitations under the law at the time ran from the date the employer initiated the illegal payment policy, not by each discriminatory paycheck. Ledbetter v. Goodyear Tire & Rubber Co., 550 U.S. 618 (2007). This ruling rendered the Act impossible to enforce.
As a result, The Lily Ledbetter Act of 2008 was signed into law. It amended The Civil Rights Act of 1964 by extending the 180-day statute of limitations for filing a lawsuit to each new discriminatory paycheck, rather than when the employer initiated the policy.
The Paycheck Fairness Act (S. 892 and H.R. 1619)
After Lily Ledbetter, various lawmakers have sought (rather unsuccessfully) to amend the Equal Pay Act to close the loopholes that are stopping women from pursuing their rights and getting compensated for their time and efforts equally with their male co-workers.
Thus, the PFA was proposed in order to amend the EPA by establishing that wage comparisons may be made between employees who perform substantially equal jobs at any of the employer’s places of business that are located in the same county or political subdivision. Many businesses operate out of multiple offices. Employers should not get a pass by shuttling employees to different locations.
Additionally, the PFA provides that a “factor other than sex” defense must be based on a bona fide, job-related factor (i.e. education, training, or experience) that is of a business necessity. Furthermore, the bill specifies that an affirmative defense cannot be made if the employer fails to provide an alternative business practice that would serve the same business purpose without producing a pay differential.
The Paycheck Fairness Act will also allow employees to recover punitive and compensatory damages, such as out of pocket expenses and emotional distress, just like every other act of discrimination under Title VII of the Civil Rights Act. The Paycheck Fairness Act will also allow class members to automatically opt into the class so that class members are fairly compensated for their missing pay.
Finally, The Paycheck Fairness Act will prohibit employers from retaliating against workers for disclosing their salary information to others. This would thwart others like Lily Ledbetter from going for years without discovering they were paid less than their male colleagues. Finally, the bill would require employers to share salary data with the Equal Employment Opportunity Commission (“EEOC”), so that the agency could enforce the laws protecting employees from discriminatory practices. “S. 2199 – Summary”. United States Congress. Retrieved 9 April 2014. The bill would also make employers who violate sex discrimination prohibitions liable in a civil action for either compensatory punitive damages. Id.
Equal Pay in the State of California
What are the potential ramifications to California workers and employers should this bill become law? Hardly any. California already has one of the strongest laws in the nation guaranteeing equal pay for equal work.
Requesting Salary Information is Prohibited
In 2018, California amended Labor Code section 432.5 to prohibit employers from asking job applicants about their current or past salaries or benefits, seeking said information from other sources or through an agent, or relying on such information to make an offer of salary. There are two limited exceptions: 1) The law does not apply to salary history information that is disclosable under state or federal law (i.e. the California Public Records Act or Freedom of Information Act) and 2) The law also does not prohibit an applicant from voluntarily offering salary information without prompting. There is nothing that prohibits an employer from asking applicants how much they are seeking in salary.
Retaliation for Disclosure of Salary History Illegal
Under California Labor Code section 232, employers are prohibited from retaliating against their employees for disclosing their salary information to others. California has already banned this type of activity so that employees are on notice of an inconsistencies in their pay with others. Federal law will not have an impact on the vast majority of California employees.
Labor Code Section 1197.5 Requires Employers to Pay Employees Equally When They Perform Substantially Similar Work
Similar to the PFA, California Labor Code Section 1197.5 requires employers to pay its employees equally if they perform “substantially similar work.” According to the Department of Industrial Relations, “Substantially similar work refers to work that is “similar in skill, effort, responsibility, and performed under similar working conditions.” https://www.dir.ca.gov/dlse/California_Equal_Pay_Act.htm.
Likewise, “skill refers to the experience, ability, education, and training required to perform the job. Effort refers to the amount of physical or mental exertion needed to perform the job. Responsibility refers to the degree of accountability or duties required in performing the job. Working conditions has been interpreted to mean the physical surroundings (temperature, fumes, ventilation) and hazards.” Id.
California requires employers to treat similarly skilled employees equally with their counterparts.
Labor Code Section 1197.5 Requires Employers to Prove That the Wage Differential Was from a Bona Fide Factor That is Unrelated to the Sex, Race, or Ethnicity of the Worker
By the same token, “an employer may defeat an Equal Pay Act claim by proving that the wage differential is due to a bona fide factor other than sex, race, or ethnicity, but to succeed on this defense, the employer must also prove that the factor is: 1) not based on or derived from a sex-, race-, or ethnicity- based factor; 2) job related; and 3) consistent with a business necessity.” Id.
California employers already have the burden to establish an eventual affirmative defense that the reasons for any wage differentials stems from legitimate business necessity and not due to sex or race.
Emotional Distress and Punitive Damages are Available for Those Who Have Been Discriminated Against in Pay Due to Gender and Other Factors
California’s Fair Employment and Housing Act codified in the Government Code Section 12926 et. seq. provides that an employer cannot discriminate against an employee on the basis of sex or race.
Pursuant to California Government Code Section 12940(a):
“It shall be an unlawful employment practice, unless based upon a bona fide occupational qualification, or, except where based upon applicable security regulations established by the United States or the State of California: (a) For an employer, because of the race, religious creed, color, national origin, ancestry, physical disability, mental disability, medical condition, marital status, sex, age, or sexual orientation of any person, to refuse to hire or employ the person or to refuse to select the person for a training program leading to employment, or to bar or to discharge the person from employment or from a training program leading to employment, or to discriminate against the person in compensation or in terms, conditions, or privileges of employment.” (emphasis added)
Emotional distress, punitive damages, and attorneys’ fees are recoverable under FEHA. Therefore, California law provides that an employee could seek and receive damages for an employer failing to pay them equally to their employer.
Labor Code Section 1197.5 Allows Employees Two Years from the Discriminatory Paycheck (Three Years if Willful) to File a Claim
Under California’s Equal Pay Act, an employee must file a claim within two years from the date of the violation. If the violation is willful, then an employee has three years to file. Like the PFA, California already recognizes that each discriminatory paycheck that reflects unequal pay is considered a violation for the purpose of calculating the deadline for filing.
California Employers (Nor the Rest of the Nation) Should Panic Over the PFA
As a lawyer who represents small businesses, as well as employees, in employment disputes, I see both sides struggle with compliance with the laws and enforcement of their rights. No one wants to see a business go under due to increased regulation.
However, the rest of the nation could learn from states like California. Business is still growing. Our equal pay laws have not devastated small businesses. In fact, they encourage healthy competition and quality candidates. Paying people equally is not only morally sound, but will only result in healthier, productive employees who will want your business to succeed. The PFA will not solve everything, but it is a right step in the direction of equali