Amended in Senate August 19, 2016

Amended in Senate June 15, 2016

Amended in Assembly May 31, 2016

California Legislature—2015–16 Regular Session

Assembly Bill No. 1676

Introduced by Assembly Members Campos and Gonzalez

(Principal coauthor: Senator Jackson)

(Coauthors: Assembly Members Bonilla, Chiu, Cristina Garcia, and Eduardo Garcia)

(Coauthor: Senator begin delete Liu ) end delete begin insert Liu) end insert

January 19, 2016

An act to amend Section 1197.5 of the Labor Code, relating to employers.

LEGISLATIVE COUNSEL’S DIGEST

AB 1676, as amended, Campos. Employers: wage discrimination.

Existing law 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. Existing law establishes exceptions to that prohibition, including, among others, where the payment is made based on any bona fide factor other than sex, such as education, training, or experience. Existing law 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. Existing law also makes it a misdemeanor for an employer to refuse or neglect to comply with the above provisions of law.

This bill would specify that prior salary cannot, by itself, justify any disparity in compensation under the bona fide factor exception to the above prohibition. By changing the definition of an existing crime, this bill would impose a state-mandated local program.

begin insert

This bill would incorporate additional changes in Section 1197.5 of the Labor Code proposed by SB 1063 that would become operative only if SB 1063 and this bill are both chaptered and become effective on or before January 1, 2017, and this bill is chaptered last.

end insert

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: yes.

The people of the State of California do enact as follows:

SECTION 1.  

The Legislature finds and declares all of the
following:

(a) Over the past decade, the wage gap has barely budged and
wage disparities continue to persist. In 2015, the gender wage gap
in California stood at 16 cents on the dollar. For women of color,
wage inequality is much worse. African American women in
California make just 63 cents and Hispanic women less than 43
cents for every dollar white non-Hispanic men make.

(b) The problematic practices of seeking salary history from
job applicants and relying on prior salary to set employees’ pay
rates contribute to the gender wage gap by perpetuating wage
inequalities across the occupational spectrum. Women are paid
less than men in 99.6 percent of occupations and are more likely
to face financial penalties for taking time out of the paid workforce
due to childbearing and family caregiving responsibilities.

(c) When employers make salary decisions during the hiring
process based on prospective employees’ prior salaries or require
women to disclose their prior salaries during salary negotiations,
women often end up at a sharp disadvantage and historical patterns
of gender bias and discrimination repeat themselves, causing
women to continue earning less than their male counterparts.

(d) Government officials have recognized the discriminatory
impact that prior salaries can have on women in the job market.
In 2015, on Equal Pay Day, the begin delete chair end delete begin insert Chair end insert of the Equal
Employment Opportunity Commission (EEOC) advised employers
on important steps they could take to ensure equal pay for equal
work, including eliminating “discriminatory pay gaps on the basis
of prior salary” and the 2005 EEOC Compliance Manual states
that “[p]rior salary cannot, by itself, justify a compensation
disparity.”

(e) In July of 2015, the acting director of the federal Office of
Personnel Management provided guidance on advancing pay
equality in the federal government, warning that reliance on salary
history “could potentially adversely affect a candidate who is
returning to the workplace after having taken extended time off
from his or her career or for whom an existing rate of pay is not
reflective of the candidate’s current qualifications or existing labor
market conditions.”

(f) Courts also have warned against relying on salary history
and have stated that prior salary cannot, by itself, justify a wage
disparity. In Corning Glass Works v. Brennan, (1974) 417 U.S.
188, the United States Supreme Court held that a pay differential
which “ar[ises] simply because men would not work at the low
rates paid women ... and reflect[s] a job market in which [the
employer] could pay women less than men for the same work” is
not based on a cognizable factor other than sex under the Equal
Pay Act (Public Law 88-38) (Id., at begin insert p. end insert 205). More recently, in Rizo
v. Yovino, Fresno County Superintendent of Schools, United States
District Court, Eastern District of California, Case No.
1:14-cv-0423-MJS, the district court denied summary judgment
on defendant’s motion under the federal Equal Pay Act based on
its finding that, “a pay structure based exclusively on prior wages
is so inherently fraught with the risk -- indeed, here, the virtual
certainty -- that it will perpetuate a discriminatory wage disparity
between men and women that it cannot stand, even if motivated
by a legitimate non-discriminatory business purpose.”(Id., at begin insert p. end insert
16). The court went on to explain that,“say[ing] an otherwise
unjustified pay differential between women and men performing
equal work is based on a factor other than sex because it reflects
historical market forces which value the equal work of one sex
over the other perpetuates the market’s sex-based subjective
assumptions and stereotyped misconceptions Congress passed the
Equal Pay Act to eradicate.” (Id., at begin insert p. end insert 17).

(g) This act will codify existing law with respect to the provision
stating that prior salary cannot, by itself, justify a wage differential
under Section 1197.5 of the Labor Code.

(h) This act will also help ensure that both employers and
workers are able to negotiate and set salaries based on the
requirements, expectations, and qualifications of the person and
the job in question, rather than on an individual’s prior earnings,
which may reflect widespread, longstanding, gender-based wage
disparities in the labor market.

SEC. 2.  

Section 1197.5 of the Labor Code is amended to read:

1197.5.  

(a) An employer shall not pay any of its employees
at wage rates less than the rates paid to employees of the opposite
sex for substantially similar work, when viewed as a composite of
skill, effort, and responsibility, and performed under similar
working conditions, except where the employer demonstrates:

(1) The wage differential is based upon one or more of the
following factors:

(A) A seniority system.

(B) A merit system.

(C) A system that measures earnings by quantity or quality of
production.

(D) A bona fide factor other than sex, such as education,
training, or experience. This factor shall apply only if the employer
demonstrates that the factor is not based on or derived from a
sex-based differential in compensation, is job related with respect
to the position in question, and is consistent with a business
necessity. For purposes of this subparagraph, “business necessity”
means an overriding legitimate business purpose such that the
factor relied upon effectively fulfills the business purpose it is
supposed to serve. This defense shall not apply if the employee
demonstrates that an alternative business practice exists that would
serve the same business purpose without producing the wage
differential.

(2) Each factor relied upon is applied reasonably.

(3) The one or more factors relied upon account for the entire
wage differential. Prior salary shall not, by itself, justify any
disparity in compensation.

(b) Any employer who violates subdivision (a) is liable to the
employee affected in the amount of the wages, and interest thereon,
of which the employee is deprived by reason of the violation, and
an additional equal amount as liquidated damages.

(c) The Division of Labor Standards Enforcement shall
administer and enforce this section. If the division finds that an
employer has violated this section, it may supervise the payment
of wages and interest found to be due and unpaid to employees
under subdivision (a). Acceptance of payment in full made by an
employer and approved by the division shall constitute a waiver
on the part of the employee of the employee’s cause of action
under subdivision (g).

(d) Every employer shall maintain records of the wages and
wage rates, job classifications, and other terms and conditions of
employment of the persons employed by the employer. All of the
records shall be kept on file for a period of three years.

(e) Any employee may file a complaint with the division that
the wages paid are less than the wages to which the employee is
entitled under subdivision (a) or that the employer is in violation
of subdivision (j). The complaint shall be investigated as provided
in subdivision (b) of Section 98.7. The division shall keep
confidential the name of any employee who submits to the division
a complaint regarding an alleged violation of subdivision (a) or
(j) until the division establishes the validity of the complaint, unless
the division must abridge confidentiality to investigate the
complaint. The name of the complaining employee shall remain
confidential if the complaint is withdrawn before the confidentiality
is abridged by the division. The division shall take all proceedings
necessary to enforce the payment of any sums found to be due and
unpaid to these employees.

(f) The department or division may commence and prosecute,
unless otherwise requested by the employee or affected group of
employees, a civil action on behalf of the employee and on behalf
of a similarly affected group of employees to recover unpaid wages
and liquidated damages under subdivision (a), and in addition shall
be entitled to recover costs of suit. The consent of any employee
to the bringing of any action shall constitute a waiver on the part
of the employee of the employee’s cause of action under
subdivision (g) unless the action is dismissed without prejudice
by the department or the division, except that the employee may
intervene in the suit or may initiate independent action if the suit
has not been determined within 180 days from the date of the filing
of the complaint.

(g) Any employee receiving less than the wage to which the
employee is entitled under this section may recover in a civil action
the balance of the wages, including interest thereon, and an equal
amount as liquidated damages, together with the costs of the suit
and reasonable attorney’s fees, notwithstanding any agreement to
work for a lesser wage.

(h) A civil action to recover wages under subdivision (a) may
be commenced no later than two years after the cause of action
occurs, except that a cause of action arising out of a willful
violation may be commenced no later than three years after the
cause of action occurs.

(i) If an employee recovers amounts due the employee under
subdivision (b), and also files a complaint or brings an action under
subdivision (d) of Section 206 of Title 29 of the United States
Code which results in an additional recovery under federal law for
the same violation, the employee shall return to the employer the
amounts recovered under subdivision (b), or the amounts recovered
under federal law, whichever is less.

(j) (1) An employer shall not discharge, or in any manner
discriminate or retaliate against, any employee by reason of any
action taken by the employee to invoke or assist in any manner
the enforcement of this section. An employer shall not prohibit an
employee from disclosing the employee’s own wages, discussing
the wages of others, inquiring about another employee’s wages,
or aiding or encouraging any other employee to exercise his or her
rights under this section. Nothing in this section creates an
obligation to disclose wages.

(2) Any employee who has been discharged, discriminated or
retaliated against, in the terms and conditions of his or her
employment because the employee engaged in any conduct
delineated in this section may recover in a civil action reinstatement
and reimbursement for lost wages and work benefits caused by
the acts of the employer, including interest thereon, as well as
appropriate equitable relief.

(3) A civil action brought under this subdivision may be
commenced no later than one year after the cause of action occurs.

begin insert

begin insert SEC. 2.5. end insert   

end insert

begin insert Section 1197.5 of the end insert begin insert Labor Code end insert begin insert is amended to
read: end insert

1197.5.  

(a) An employer shall not pay any of its employees
at wage rates less than the rates paid to employees of the opposite
sex for substantially similar work, when viewed as a composite of
skill, effort, and responsibility, and performed under similar
working conditions, except where the employer demonstrates:

(1) The wage differential is based upon one or more of the
following factors:

(A) A seniority system.

(B) A merit system.

(C) A system that measures earnings by quantity or quality of
production.

(D) A bona fide factor other than sex, such as education,
training, or experience. This factor shall apply only if the employer
demonstrates that the factor is not based on or derived from a
sex-based differential in compensation, is job related with respect
to the position in question, and is consistent with a business
necessity. For purposes of this subparagraph, “business necessity”
means an overriding legitimate business purpose such that the
factor relied upon effectively fulfills the business purpose it is
supposed to serve. This defense shall not apply if the employee
demonstrates that an alternative business practice exists that would
serve the same business purpose without producing the wage
differential.

(2) Each factor relied upon is applied reasonably.

(3) The one or more factors relied upon account for the entire
wage differential. begin insert Prior salary shall not, by itself, justify any
disparity in compensation. end insert

begin insert

(b) An employer shall not pay any of its employees at wage rates
less than the rates paid to employees of another race or ethnicity
for substantially similar work, when viewed as a composite of skill,
effort, and responsibility, and performed under similar working
conditions, except where the employer demonstrates:

end insert begin insert

(1) The wage differential is based upon one or more of the
following factors:

end insert begin insert

(A) A seniority system.

end insert begin insert

(B) A merit system.

end insert begin insert

(C) A system that measures earnings by quantity or quality of
production.

end insert begin insert

(D) A bona fide factor other than race or ethnicity, such as
education, training, or experience. This factor shall apply only if
the employer demonstrates that the factor is not based on or
derived from a race- or ethnicity-based differential in
compensation, is job related with respect to the position in
question, and is consistent with a business necessity. For purposes
of this subparagraph, “business necessity” means an overriding
legitimate business purpose such that the factor relied upon
effectively fulfills the business purpose it is supposed to serve. This
defense shall not apply if the employee demonstrates that an
alternative business practice exists that would serve the same
business purpose without producing the wage differential.

end insert begin insert

(2) Each factor relied upon is applied reasonably.

end insert begin insert

(3) The one or more factors relied upon account for the entire
wage differential. Prior salary shall not, by itself, justify any
disparity in compensation.

end insert begin delete

(b)

end delete

begin insert (c) end insert  Any employer who violates subdivision (a) begin insert or (b) end insert is liable
to the employee affected in the amount of the wages, and interest
thereon, of which the employee is deprived by reason of the
violation, and an additional equal amount as liquidated damages.

begin delete

(c)

end delete

begin insert (d) end insert  The Division of Labor Standards Enforcement shall
administer and enforce this section. If the division finds that an
employer has violated this section, it may supervise the payment
of wages and interest found to be due and unpaid to employees
under subdivision begin delete (a). end delete begin insert (a) or (b). end insert Acceptance of payment in full
made by an employer and approved by the division shall constitute
a waiver on the part of the employee of the employee’s cause of
action under subdivision begin delete (g). end delete begin insert (h). end insert

begin delete

(d)

end delete

begin insert (e) end insert  Every employer shall maintain records of the wages and
wage rates, job classifications, and other terms and conditions of
employment of the persons employed by the employer. All of the
records shall be kept on file for a period of three years.

begin delete

(e)

end delete

begin insert (f) end insert  Any employee may file a complaint with the division that
the wages paid are less than the wages to which the employee is
entitled under subdivision (a) begin insert or (b) end insert or that the employer is in
violation of subdivision begin delete (j). end delete begin insert (k). end insert The complaint shall be investigated
as provided in subdivision (b) of Section 98.7. The division shall
keep confidential the name of any employee who submits to the
division a complaint regarding an alleged violation of subdivision
begin delete (a) or (j) end delete begin insert (a), (b), or (k) end insert until the division establishes the validity
of the complaint, unless the division must abridge confidentiality
to investigate the complaint. The name of the complaining
employee shall remain confidential if the complaint is withdrawn
before the confidentiality is abridged by the division. The division
shall take all proceedings necessary to enforce the payment of any
sums found to be due and unpaid to these employees.

begin delete

(f)

end delete

begin insert (g) end insert  The department or division may commence and prosecute,
unless otherwise requested by the employee or affected group of
employees, a civil action on behalf of the employee and on behalf
of a similarly affected group of employees to recover unpaid wages
and liquidated damages under subdivision begin delete (a), end delete begin insert (a) or (b), end insert and in
addition shall be entitled to recover costs of suit. The consent of
any employee to the bringing of any action shall constitute a waiver
on the part of the employee of the employee’s cause of action
under subdivision begin delete (g) end delete begin insert (h) end insert unless the action is dismissed without
prejudice by the department or the division, except that the
employee may intervene in the suit or may initiate independent
action if the suit has not been determined within 180 days from
the date of the filing of the complaint.

begin delete

(g) Any

end delete

begin insert (h) end insert begin insert   end insert begin insert An end insert employee receiving less than the wage to which the
employee is entitled under this section may recover in a civil action
the balance of the wages, including interest thereon, and an equal
amount as liquidated damages, together with the costs of the suit
and reasonable attorney’s fees, notwithstanding any agreement to
work for a lesser wage.

begin delete

(h)

end delete

begin insert (i) end insert  A civil action to recover wages under subdivision (a) begin insert or (b) end insert
may be commenced no later than two years after the cause of action
occurs, except that a cause of action arising out of a willful
violation may be commenced no later than three years after the
cause of action occurs.

begin delete

(i)

end delete

begin insert (j) end insert  If an employee recovers amounts due the employee under
subdivision begin delete (b), end delete begin insert (c), end insert and also files a complaint or brings an action
under subdivision (d) of Section 206 of Title 29 of the United
States Code which results in an additional recovery under federal
law for the same violation, the employee shall return to the
employer the amounts recovered under subdivision begin delete (b), end delete begin insert (c), end insert or the
amounts recovered under federal law, whichever is less.

begin delete

(j)

end delete

begin insert (k) end insert  (1) An employer shall not discharge, or in any manner
discriminate or retaliate against, any employee by reason of any
action taken by the employee to invoke or assist in any manner
the enforcement of this section. An employer shall not prohibit an
employee from disclosing the employee’s own wages, discussing
the wages of others, inquiring about another employee’s wages,
or aiding or encouraging any other employee to exercise his or her
rights under this section. Nothing in this section creates an
obligation to disclose wages.

(2) Any employee who has been discharged, discriminated or
retaliated against, in the terms and conditions of his or her
employment because the employee engaged in any conduct
delineated in this section may recover in a civil action reinstatement
and reimbursement for lost wages and work benefits caused by
the acts of the employer, including interest thereon, as well as
appropriate equitable relief.

(3) A civil action brought under this subdivision may be
commenced no later than one year after the cause of action occurs.

begin insert

begin insert SEC. 3. end insert   

end insert begin insert

Section 2.5 of this bill incorporates amendments to
Section 1197.5 of the Labor Code proposed by both this bill and
Senate Bill 1063. It shall only become operative if (1) both bills
are enacted and become effective on or before January 1, 2017,
(2) each bill amends Section 1197.5 of the Labor Code, and (3)
this bill is enacted after Senate Bill 1063, in which case Section 2
of this bill shall not become operative.

end insert

begin delete SEC. 3. end delete

begin insert SEC. 4. end insert   

No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of
the Government Code, or changes the definition of a crime within
the meaning of Section 6 of Article XIII B of the California
Constitution.