BILL ANALYSIS Ó SENATE COMMITTEE ON LABOR AND INDUSTRIAL RELATIONS Senator Tony Mendoza, Chair 2015 - 2016 Regular Bill No: AB 1017 Hearing Date: June 24, 2015 ----------------------------------------------------------------- |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? ANALYSIS 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 AB 1017 (Campos) Page 2 of ? 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 misdemeanor. COMMENTS 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 AB 1017 (Campos) Page 3 of ? 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 AB 1017 (Campos) Page 4 of ? 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 AB 1017 (Campos) Page 5 of ? 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 payscale.com that found 85 AB 1017 (Campos) Page 6 of ? 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 offer. 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 AB 1017 (Campos) Page 7 of ? 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 Schwarzenegger. 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. SUPPORT American Federation of State, County and Municipal Employees, AFL-CIO AB 1017 (Campos) Page 8 of ? California Employment Lawyers Association OPPOSITION 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 Bureau 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 -- AB 1017 (Campos) Page 9 of ?