BILL ANALYSIS Ó AB 1017 Page 1 Date of Hearing: April 30, 2015 ASSEMBLY COMMITTEE ON LABOR AND EMPLOYMENT Roger Hernández, Chair AB 1017 (Campos) - As Amended April 16, 2015 SUBJECT: Employers SUMMARY: Prohibits the use of employee salary history information, as specified, and enacts other requirements. Specifically, this bill: 1)Provides that an employer shall not publish or list an advertisement to recruit candidates for hire without including the minimum rate of pay, including overtime, as specified. 2)Prohibits an employer from paying wages for a position less than what were advertised. 3)Prohibits an employer from seeking salary history information, including compensation and benefits, from an applicant for employment for an interview or as a condition of employment. 4)Prohibits an employer from releasing the salary history of any current or former employee to any prospective employer without written authorization from the current or former employee. EXISTING LAW: AB 1017 Page 2 1)Generally prohibits an employer from paying an employee at wage rates less than the rates paid to employees of the opposite sex in the same establishment for equal work on jobs the performance of which requires equal skill, effort, and responsibility, and which are performed under similar working conditions. 2)Establishes exceptions to that prohibition where the payment is made pursuant to a seniority system, a merit system, a system which measures earnings by quantity or quality of production, or a differential based on any bona fide factor other than sex. 3)Makes it a misdemeanor for an employer or other person acting either individually or as an officer, agent, or employee of another person to pay or cause to be paid to any employee a wage less than the rate paid to an employee of the opposite sex as required by these provisions, or who reduces the wages of any employee in order to comply with these provisions. FISCAL EFFECT: Unknown COMMENTS: This bill is sponsored by the California Employment Lawyers Association and the American Association of University Women (AAUW), who argue that our slow rate of progress on eliminating gender pay inequality is due at least in part because we have allowed employers to preserve historical inequities. AB 1017 Page 3 Recent Research on the Pay Gap According to research from the Institute for Women's Policy Research (IWPR), in 2013, female full-time workers made only 78 cents for every dollar earned by men, a gender wage gap of 22 percent. They conclude that if change continues at the same pace, it will take 44 years - or until 2058 - for women to reach pay parity. In California, the gap will close in 2042. According to a report by the National Partnership for Women & Families, women in California earn 84 cents for each dollar earned by men (as of October 2014). California has one of the largest wage gaps for African American and Hispanic women, who make just 64 and 44 cents, respectively, for every $1 a white male makes. In 2011, the Georgetown University Center on Education and the Workforce found that college-educated women working full time earn $650,000 less than their male peers do over the course of a lifetime. Do Inquiries Into Salary History Perpetuate Inequality? According to the sponsors, because changing jobs is often the best opportunity women have to increase their pay we need to make sure they are not penalized by prior salaries that may well have been discriminatory. They state that policies that peg current salary to prior pay by default, ignore that the prior salary earned by a male job applicant may itself be the product of sex discrimination or may AB 1017 Page 4 reflect the residual effects of the traditionally enhanced value attached to the kind of work usually performed by men. Recognizing these facts, courts have cautioned employers that salary matching is frequently discriminatory. In Futran v. Ring Radio Co. 501 F. Supp. 734, 739 n.2 (N.D. Ga. 1980), for example, a court held that "to give more than nominal consideration to [prior pay] would serve to perpetuate the historic employment discrimination in wages suffered by females in the work force." The Equal Employment Opportunity Commission (EEOC) has echoed that concern, stating that prior salary history should not be the sole explanation for a wage disparity. Quoting from court decisions, the EEOC has stated "Prior salary cannot, by itself, justify a compensation disparity. This is because prior salaries of job candidates can reflect sex-based compensation discrimination. Thus, permitting prior salary alone as a justification for a compensation disparity 'would swallow up the rule and inequality in compensation among genders would be perpetuated.' quoting Irby v. Bittick, 44 F.3d 949, 955 (11th Cir. 1995). See also Glenn v. General Motors Corp., 841 F.2d 1567, 1571 (11th Cir. 1988) (prior salary alone cannot justify a pay disparity); Faust v. Hilton Hotels Corp., 1990 WL 120615, at *5 (E.D. La. 1990) (reliance on prior salary as a factor other than sex would "allow employer to pay one employee more than an employee of the opposite sex because that employer or a previous employer discriminated against the lower paid employee"). Critics contend that the impact of prior salaries is particularly concerning in certain industries and across racial lines. For example, women in Silicon Valley with advanced degrees are making more than 70 percent less than men with the same degrees. In addition, California has one of the largest wage gaps for African American and Hispanic women, who make just 64 and 44 cents, respectively, for every $1 a white man makes. These depressed salaries only serve to devalue a woman's worth and make it harder for her to negotiate better pay. AB 1017 Page 5 On the contrary, by limiting an employer's ability to ask about prior salary, we help put men and women on more of an equal footing. Employers already are prohibited from asking certain questions from job applicants, such as marital status, religion or medical history. This kind of information is simply not relevant and could allow employers to discriminate. The sponsors contend that, similarly, pay history is only relevant to the extent it allows employers to determine how low they can drive the bargain. They argue that if we truly want to eliminate the vestiges of pay discrimination, then we cannot allow salary decisions across the job market to be built upon a history of unfair pay. They contend that it's time we put an end to this prejudicial hiring practice and give women a better chance to negotiate a fair deal. Specific Changes Proposed by This Bill - And Proffered Rationale in Support First, this bill would prohibit an employer from seeking salary history information, including compensation and benefits, from an applicant for employment for an interview or as a condition of employment. This bill would also prohibit an employer from releasing the salary history of any current or former employee to any prospective employer without written authorization from the current or former employee. As discussed above, the sponsors contend that this would create a "blind process" solution to the gender pay gap issue. According to AAUW, the pay gap begins with a woman's first job. From that moment forward, her past salary will hold down her future salary since salary offers consider past income. Often this is done by adding 10-15 percent to the previous pay. AB 1017 Page 6 Removing salary history removes the inappropriate use of salary as the grading system of the working world. Second, this bill would provide that an employer shall not publish or list an advertisement for hire without including the minimum rate of pay, including overtime, as specified. This bill also prohibits an employer from paying wages for a position less than what were advertised. The sponsors contend that most employees in the private sector have no real knowledge of the value of their job or what other employees with similar jobs are making. Many companies either employ or consult compensation specialists to determine the salary for a job yet they still ask the job candidate to provide desired salary without providing a minimum salary for the job. The typical job applicant/candidate will provide desired salary and salary history while the employer does not provide any financial information about the job. This uneven distribution of knowledge ensures the employer is able to hire at the lowest salary possible for each candidate. Moreover, the sponsors contend that this too perpetuates gender pay inequality. They state that research done by Linda Babcock at Carnegie Mellon University shows that men state salaries 30 percent higher than women when negotiating. Since many non-government jobs do not include any pay information, the negotiation starts when asked to state a desired salary. On average, men will set forth a desired salary 30 percent higher number then women. ARGUMENTS IN OPPOSITION A coalition of employers, including the California Chamber of AB 1017 Page 7 Commerce, opposes this measure and states the following: "Limits Candidates Ability to Obtain Job Opportunities: [This bill] prohibits an employer from posting a job advertisement unless the advertisement sets forth a minimum rate of pay for the position and states that an employer cannot pay below the advertised rate. Eliminating an employer's ability to adjust the minimum rate of pay once posted in an advertisement will limit an employer's flexibility to offer an employee a position who may not meet all of the qualifications of the job. Many employers who interview candidates may find that the employee is not adequately qualified for the position posted, but nonetheless would like to offer him/her employment at a lesser compensation to allow the individual to gain the experience, skills, and training necessary. For example, recent college graduates, long-term unemployed individuals, or first time employees in the marketplace, may not have the requested qualifications that justify the stated minimum level of compensation, but yet employers would like to give them a job opportunity. [This bill] would preclude an employer from offering such an applicant the position at a lower rate, which will limit such applicants' employment opportunities. [This Bill] Does Not Create Transparency or Address Wage Disparity: Employers determine the appropriate wage and salary to pay an applicant based upon various factors, including skill, education, prior experience, as well as the funding available for the job. Setting forth an artificial minimum rate of pay for a job position will not change this employer AB 1017 Page 8 determination. Moreover, employers may feel compelled to reduce the minimum rate of pay in an advertisement in order to create sufficient room to adjust that rate depending on the various factors and varied candidates for the job. Accordingly, [this bill] will not provide transparency into the rate of pay ultimately offered to the applicant for the job position. Moreover, to the extent women actually undervalue their work and skills, forcing an employer to set forth an artificial minimum rate of pay may do more harm than good. An employee, who undervalues his or her work, is not anymore likely to negotiate for a higher amount from his or her former employment than from an artificial minimum wage rate under [this bill]. Accordingly, that same employee is either going to: (1) experience the same potential set back in compensation as he or she does now; or (2) experience a more significant setback if the applicant assumes that the minimum rate of pay is the final amount the employer is willing to compensate for the position. Disclosure of wage rates or salary ranges for a job position or even disclosure of actual compensation of wages has not been proven to address gender equity pay. In a Sacramento Bee article dated March 28, 2015, it detailed findings that, despite disclosing actual compensation of all employees, women staff in the California Legislature actually made less than male staff. Salary Information Can Increase Wages: AB 1017 Page 9 Despite the assumption that employers have accurate wage information on what the current market is for all potential job positions, they often do not. By requesting salary information, employers can adjust any unrealistic expectations or salary ranges to match the current market rate for the advertised job position. This has worked to the benefit of the applicant/employee. Posting a Minimum Commission or Piece Rate in A Job Advertisement Is Unreasonable: Unlike a minimum hourly rate, a commission or piece rate is primarily based upon employee output. Accordingly, forcing an employer to identify a minimum commission or piece rate in a job advertisement that cannot be adjusted is simply unreasonable. Current Protections Exist to Address Pay Disparity: California has numerous protections in place to encourage equitable pay for equitable work. Specifically, Labor Code Section 232 already precludes an employer from preventing an employee from disclosing his or her wages. Labor Code Section 1197.5 mandates an employer provide equal wages for equal work. The Fair Employment and Housing Act (FEHA) precludes any discrimination in the workplace based upon various protected classifications, including gender. These existing protections are likely what contributed to California being ranked as one of the top 5 states for gender equity in pay in the 2013 report issued by American Association of University of Women (AAUW). AB 1017 Page 10 Additional Avenue of Litigation: To the extent that forcing employers to set forth a minimum wage rate in their advertisement does not provide any actual transparency or equity in pay, [this bill] represents another mandate on employers that will subject them to potential litigation under the Labor Code Private Attorney General Act (PAGA), with statutory penalties and employee-only attorney's fees. Exposing employers to additional threats of litigation for failing to set forth a minimum rate of pay for a commission or piece rate, or that includes overtime, as well as credits for meal and lodging, is an unnecessary increase in doing business." REGISTERED SUPPORT / OPPOSITION: Support American Federation of State, County and Municipal Employees California Employment Lawyers Association California Immigrant Policy Center AB 1017 Page 11 California Labor Federation, AFL-CIO Equal Rights Advocates Opposition Air Conditioning Trade Association Associated Builders and Contractors of California California Association of Bed and Breakfast Inns California Association of Winegrape Growers California Chamber of Commerce California Employment Law Council California Grocers Association California Hotel and Lodging Association California Manufacturers and Technology Association California Newspaper Publishers Association California Professional Association of Specialty Contractors California Trucking Association El Centro Chamber of Commerce Fairfield-Suisun City Chamber of Commerce Fullerton Chamber of Commerce Greater Bakersfield Chamber of Commerce Greater Conejo Valley Chamber of Commerce Greater Fresno Area Chamber of Commerce National Federation of Independent Business AB 1017 Page 12 San Jose Silicon Valley Chamber of Commerce Santa Maria Valley Chamber of Commerce Visitor and Convention Bureau Southwest California Legislative Council The Chamber of the Santa Barbara Region Western Electrical Contractors Association Wine Institute Analysis Prepared by:Ben Ebbink / L. & E. / (916) 319-2091