BILL ANALYSIS                                                                                                                                                                                                    

                             Senator Tony Mendoza, Chair
                                2015 - 2016  Regular 

          Bill No:               AB 1017      Hearing Date:    June 24,  
          |Author:    |Campos                                               |
          |Version:   |May 18, 2015                                         |
          |Urgency:   |No                     |Fiscal:    |Yes              |
          |Consultant:|Deanna Ping                                          |
          |           |                                                     |
                                Subject:  Employers.

          KEY ISSUE
          Should the Legislature prohibit an employer from seeking salary  
          history information from an applicant for an interview or as a  
          condition of employment?

          Should the Legislature 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?

           Existing law  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 where the  
          performance of which requires equal skill, effort, and  
          responsibility and which are performed under similar working  
          conditions, except where the payment is made pursuant to a:
               a)     a seniority system


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               b)     merit system
               c)     system which measures earnings by quantity or  
                 quality of production, or a differential based on any  
                 bona fide factor other than sex. 
          (Labor Code 1197.5)

           Existing law  states that an employer that pays or causes to be  
          paid any employee a wage less than the rate paid to an employee  
          of the opposite sex and is guilty of a misdemeanor and is  
          punishable by a fine of not more than ten thousand dollars or by  
          imprisonment for not more than six months. (Labor Code 1199.5) 

          This Bill  prohibits the use of employee salary history  
          information, as specified, and enacts other requirements.   
          Specifically, this bill:

          1)Prohibits an employer, orally or in writing, from seeking  
            salary history information, including compensation and  
            benefits, from an applicant for an interview or as a condition  
            of employment.

          2)Prohibits an employer from releasing the salary history of any  
            current or former employee to any prospective employer in  
            response to a request, as part of an interview or hiring  
            process, without written authorization from the current or  
            former employee.

          3)Would make any person violating this article guilty of a  

          1.  Research on Gender Pay Disparity 

            There have been numerous studies dedicated to calculating  
            disparities in earnings between men and women in the workplace  
            over the last fifty years. In 1963, women who worked full-time  
            year-round made 59 cents on average for every dollar earned by  


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            a man and according to the American Association of University  
            Women (AAUW). Today that number stands at 78 percent for women  
            compared to their male counterparts, a gap of 22 cents. AAUW  
            also ranked the wage gap for individual states in the US,  
            California ranking 5th with a gap of 84 percent. 

            This gap has narrowed due to various factors, including  
            women's progress in education and workforce participation. A  
            study from Francine D. Blau and Lawrence M. Khan, "The Gender  
            Pay Gap: Have Women Gone as Far as They Can?" found that if  
            women had the same education, experience, demographic  
            characteristics, industrial and occupational distribution, and  
            union coverage as men, the wage ratio would rise to about 91  
            percent of men's wages - an 8 percent unexplained difference  
            that the researchers suggest could be influenced by  
            discrimination. A 2013 Congressional Research Service report  
            "Pay Equity: Legislative and Legal Developments" referenced a  
            study commissioned by the U.S. Department of Labor that used a  
            different data source than Blau and Kahn from 2007 and a  
            slightly different set of personal and human capital  
            characteristic controls. The study found an unexplained  
            earnings differential between 5 and 7 percent. 

            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.
           2.  Legislative Effort for Pay Equity  
            On a federal level, the Equal Pay Act of 1963 prohibits  
            covered employers from paying lower wages to female employees  
            than male employees for "equal work" on jobs requiring "equal  
            skill, effort, and responsibility" and performed under similar  
            working conditions at the same location. The most recent piece  
            of pay equity legislation signed into law by President Obama  
            was the Lilly Ledbetter Act of 2009 which extends the time  
            period in which an employee can file a claim to recover lost  
            wages due to discrimination. Other pay equity bills that are  
            under consideration at the federal level include the Paycheck  


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            Fairness Act which would provide greater wage transparency as  
            well as the Fair Pay Act which would substitute "equivalent  
            jobs" for the "equal" work standard.  

            California enacted the California Equal Pay Act in 1949 with  
            "equal pay for equal work" language, similar to the federal  
            Equal Pay Act of 1963. States such as Alaska, Arkansas, Idaho,  
            Illinois, Maine, Maryland, Massachusetts, North Dakota,  
            Oklahoma, Oregon, South Dakota, Tennessee, West Virginia, have  
            state Equal Pay Acts with standards of equal pay for work of a  
            substantially similar or comparable character. And according  
            to a Fact Sheet from the Women's Bureau ten states, including  
            California, have enacted state laws to address employer wage  
            secrecy policies and increase wage transparency. 

          3.  Need for this bill?

             According to the author, changing jobs is often the best  
            opportunity women have to increase their pay and it is  
            important to make sure they are not penalized by prior  
            salaries that may have been discriminatory. The author notes  
            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 reflect  
            the residual effects of the traditionally enhanced value  
            attached to the kind of work usually performed by men. The  
            courts have recognized this and have cautioned employers that  
            salary matching can be a discriminatory practice. 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  


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            F.3d 949, 955 (11th Cir. 1995).

            This bill would prohibit an employer from seeking salary  
            history information, including compensation and benefits, from  
            an applicant 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. The author argues that AB 1017 is  
            intended to create a 'blind' process solution to the gender  
            pay gap issue, especially for employers that may not realize  
            the impact of long established practices on female workers.  
            The author states that by limiting an employer's ability to  
            ask about prior salary, we help put men and women on more of  
            an equal footing.  

          4.  Proponent Arguments  :

            Proponents note that a recent report from the Institute for  
            Women's Policy Research stated that if progress continues at  
            its current rate, the gender wage gap will note close until  
            2042. Proponents argue that the current slow rate of progress  
            could be due in part because employers are allowed to base  
            salary decisions during the hiring process on prior salaries  
            that could reflect historical inequities. Proponents also note  
            that according to American Association of University Women,  
            the pay gap begins with a woman's first job and from that  
            moment forward, her past salary will hold down her future  
            salary since salary offers consider past income. Proponents  
            argue that removing salary history removes the inappropriate  
            use of salary as the grading system of the working world.

            Proponents 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. They argue that 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.  Proponents note that the typical  
            job applicant/candidate will provide desired salary and salary  
            history while the employer does not provide any financial  
            information about the job.  Proponents argue that this uneven  
            distribution of knowledge ensures the employer is able to hire  
            at the lowest salary possible for each candidate. Proponents  
            bring attention to a study by that found 85  


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            percent of employers use salary ranges to structure  
            compensation programs, based on online salary data, salary  
            surveys, association data, or consultants. 

            Moreover, proponents counter the opponent argument that salary  
            data allowed employers to adjust unreasonably expectations or  
            salary ranges to match the market rate for the position by  
            arguing that employers can easily adjust their expectations or  
            salary range based on the salary requested by the job  
            application, as opposed to her prior salary, which is often an  
            arbitrary amount based on a prior employer's judgment that may  
            or may not have been discriminatory. Proponents conclude that  
            by creating a more unbiased structure for negotiating pay  
            during the hiring process, AB 1017 will help empower women to  
            negotiate a fair salary and hopefully get us closer to  
            achieving pay equity in California. 

          5.  Opponent Arguments  :

            Opponents argue that there are several legitimate,  
            non-discriminatory reasons why employers seek information  
            regarding prior compensation of an applicant -for example,  
            employers may not have accurate wage information on what the  
            current market is for all potential job positions and in  
            competitive industries, business competitors can utilize  
            salary data to lure talented employees from their workforce.  

            According to opponents, by requesting salary information,  
            employers can adjust any unrealistic expectations or salary  
            ranges to match the current market rate for the advertised job  
            position. Additionally, opponents argue it can be utilized as  
            a reference regarding whether the employee's expectations of  
            compensation far exceed what the employer can realistically  

            Opponents note that the concern in question asks if the  
            applicant's final compensation is offered/paid compared to  
            those in the same job category. Opponents argue that Labor  
            Code Section 1197.5 requires an employer to provide equal pay  
            for equal work, which Senator Jackson is seeking to strengthen  
            through SB 358. Opponents also note that the federal Equal Pay  
            Act, the Fair Employment and Housing Act, and Title VII  
            preclude an employer from discriminating against an employee,  
            including wages, on the basis of gender - arguing that there  
            are existing protections to preclude an employer from paying a  


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            female employee less, even if the employee's prior salary was  
            lower than her male counterpart.

            Lastly, opponents argue an employer should not be subject to  
            litigation under the Labor Code Private Attorneys General Act  
            (PAGA) Sections 2699, for inquiring into an applicant's salary  
            history or prior compensation when there is no ultimate harm  
            to the applicant/employee.  

          6.  Prior Legislation  :

            SB 358 of 2015 (Jackson) - would prohibits an employer from  
            paying any employee at wage rates less than the rates paid to  
            employees of the opposite sex for work of a comparable  
            character on jobs the performance of which requires comparable  
            skills, effort, and responsibility, and that are performed  
            under similar working conditions and remove the 'any bona fide  
            factor other than sex' exception to instead a bona fide factor  
            with a business necessity. 

            AB 2555 of 2006 (Oropeza) - would have increased the damages  
            for which an employer may be liable for gender-based pay  
            discrimination and impose a civil penalty for violations of  
            law, as specified; establish a state Equal Pay Commission as  
            specified;  require employers of  50 or more to provide each  
            employee with a written job statement. This bill was vetoed by  
            Governor Schwarzenegger. 

            AB 169 of 2005 (Oropeza) - would have increased the amount of  
            liquidated damages due to employees who are paid unfairly in  
            violation of existing law relating to gender-based payment  
            discrimination. This bill was vetoed by Governor  

            AB 2317 of 2004 (Oropeza) -would have increased the amount of  
            liquidated damages paid for violations of state law  
            prohibiting gender-based pay discrimination. This bill was  
            vetoed by Governor Schwarzenegger. 

          American Federation of State, County and Municipal Employees,  


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          California Employment Lawyers Association

          California Chamber of Commerce
          Air Conditioning Trade Association
          Associated Builders and Contractors of California 
          Auto Care Association
          California Association of Bed and Breakfast Inns
          California Association of Winegrape Growers
          California Business Properties Association 
          California Employment Law Council
          California Grocers Association
          California Hotel and Lodging Association
          California League of Food Processors
          California Manufacturers and Technology Association
          California Restaurant Association
          California Professional Association of Specialty Contractors
          California Travel Association 
          California Trucking Association
          CAWA - Representing the Automotive Parts Industry
          Civil Justice Association of California
          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
          Rancho Cordova Chamber of Commerce
          Redondo Beach Chamber of Commerce and Visitors Bureau
          San Jose Silicon Valley Chamber of Commerce
          Santa Maria Valley Chamber of Commerce Visitor and Convention  
          South Bay Association of Chambers of Commerce
          Southwest California Legislative Council
          The Chamber of the Santa Barbara Region
          Torrance Area Chamber of Commerce
          Western Electrical Contractors Association 
          Wine Institute

                                      -- END --


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