BILL ANALYSIS Ó AB 1676 Page A Date of Hearing: April 20, 2016 ASSEMBLY COMMITTEE ON LABOR AND EMPLOYMENT Roger Hernández, Chair AB 1676 (Campos) - As Introduced January 19, 2016 SUBJECT: Employers: salary information SUMMARY: Prohibits the use of employee salary history information, as specified, and enacts other requirements. Specifically, this bill: 1)Prohibits an employer, including state and local government employers, from seeking salary history information, including compensation and benefits, about an applicant for employment either personally or through an agent. 2)Requires an employer, except state and local government employers, upon reasonable request, to provide the pay scale for a position to an applicant for employment. 3)Provides that a violation of this bill's provisions would not be subject to the misdemeanor provision. EXISTING LAW: AB 1676 Page B 1)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 this 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: The author argues that, it has been 50 years since the enactment of the Equal Pay Act, seven years since President Obama signed the Lilly Ledbetter Fair Pay Act and women continue making substantially less than men. Women earn 78 cents for every dollar their white male counterparts make. 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. Because changing jobs is often the best opportunity women have to increase their pay, we need to make sure they are not AB 1676 Page C penalized by prior salaries that may well have been discriminatory. 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. On average, California women who are employed full time lose a total of approximately $37.7 billion every year due to the wage gap. 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. Women who are surgeons earn 71 percent of what men earn, while food preparers earn 87 percent, according to data from Claudia Goldin, a Harvard economist. The pay gap begins early in women's careers. According to a study by the American Association of University Women, women one year out of college, working full time, were paid on average just 82 percent of what their male counterparts make. This number shows that there is still a significant wage gap when accounting for age, education and family responsibilities. These lost wages mean families have less money to spend on goods and services that help drive economic growth. In California today, mothers are the primary or sole breadwinners in nearly 40 percent of families, and married mothers are the primary or co-breadwinners in nearly two-thirds of families. That means women's wages are key to their families' ability to make ends meet and get ahead. AB 1676 Page D According to a recent report from the Institute for Women's Policy Research, the gender wage gap in the United States will not close until 2058 if progress continues at its current rate. But perhaps our slow rate of progress is due at least in part because we have allowed employers to preserve historical inequities. By removing past salary history from the hiring determination and requiring employers to be more transparent, AB 1676 will help ensure that employers will not be able to use a history of low pay as justification for continuing to underpay women. According to the author, it's time we put an end to this prejudicial hiring practice and give women a better chance to negotiate a fair deal. Argument Regarding Practical Application of Previous Salaries & Salary Negotiations A New York Times article from January 2016 offers insight into the potential practical applications of using previous salaries as a hiring tool and the gender inequities often found in salary AB 1676 Page E negotiations. <1> When receiving job offers, 51.5 percent of men and 12.5 percent of women asked for more money, according to a study of Carnegie Mellon University graduate students by Linda Babcock, an economist at the university. In other research, she found that when women asked (for more money), they asked for 30 percent less than men requested. Her research and that of others also has found that women are penalized for negotiating, while men are rewarded for the same behavior. (As the actress Jennifer Lawrence wrote in Lenny after the Sony hacking revealed that she was paid less than her male co-stars, she didn't fight for more because "I didn't want to seem 'difficult' or 'spoiled.' ") Because starting salaries determine raises and future salaries, women who do not bargain lose as much as $750,000 for middle-income jobs and $2 million for high-income jobs over their careers, Ms. Babcock found. One solution, Ms. Babcock said, is to coach women to negotiate. Another is to change corporate practices so the people who set compensation are aware of the disparity and are advocates for women during --------------------------- <1>The New York Times, How to Bridge that Stubborn Pay Gap, by Claire Cain Miller, January 15, 2016. http://www.nytimes.com/2016/01/17/upshot/how-to-bridge-that-stubb orn-pay-gap.html?_r=0 AB 1676 Page F negotiations. Arguments in Support The Women's Foundation of California supports this measure and states, "By creating a less biased structure for negotiating pay during the hiring process, AB 1676 will be a proactive way to help empower women to negotiate a fair salary and hopefully get us closer to achieving pay equity in California." The California Federation of Teachers supports this measure and states, "Recently, government officials have started to recognize the discriminatory impact that prior salaries can have on women in the job market. This past year, the Chair of the Equal Employment Opportunity Commission advised employers on how to ensure equal pay for equal work, including eliminating "discriminatory pay gaps on the basis of prior salary." Basing an employee's compensation off of their previous salary puts women at a disadvantage because their salary is then just compounded with any past biases or negotiation disadvantages. It becomes a cycle that follows women for the entirety of their career. The value of each position should be based on its duties, and the skill, education, and experience of an applicant, not on a person's sex. Research has shown that wage transparency raises wages and reduces disparity. AB 1676 (Campos) will move us closer to achieving pay equity in California." Arguments in Opposition A coalition of employers, including the California Chamber of Commerce, opposes this measure. They state that basing AB 1676 Page G compensation solely on an applicant's prior salary is already a questionable business practice. See EEOC Compliance Manual, December 5, 2000 (stating,"[p]rior 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." However, they argue that there are several legitimate, non-discriminatory reasons why employers seek information regarding prior compensation of an applicant. Employers do not necessarily have accurate wage information on what the current market is for all potential job positions. Employers in competitive industries often do not advertise salaries, in order to utilize their pay structure as a way in which to lure talented employees from their competition. By requesting salary information, employers can adjust any unrealistic expectations or salary ranges to match the current market rate for the advertised job position. Opponents also argue that Labor Code Section 1197.5 requires an employer to provide equal pay for substantially similar work, which Senator Jackson strengthened last year through SB 358, which was signed into law. Senator Jackson, numerous media outlets and various articles have referenced SB 358 as the "toughest equal pay law in the nation." SB 358 went into effect on January 1, 2016. Adequate time has not been given to assess how implementation of SB 358 is faring. Opponents also argue that this bill will be subject to increased litigation because any violation will be subject to litigation AB 1676 Page H under the Labor Code Private Attorneys General Act (PAGA), Sections 2698, et seq. Under this bill, a simple inquiry into an applicant's salary history or prior compensation when there is no ultimate harm to the applicant/employee would create an opportunity for litigation. Finally, opponents state that his bill indicates it applies to all state and local government employees, including the Legislature, however it specifically excludes all salary history information that is required to be publicly disclosed, such as all of the salaries of existing Legislative staff. They state there is simply no justification to impose a prohibition onto private sector employers, but not a public sector employer, such as the Legislature; especially because the government is not immune from the issue of wage disparity. Previous Related Legislation AB 1017 (Campos) from 2015 was substantially similar to AB 1676. AB 1017 was vetoed by the Governor. The Governor's veto message stated: "I agree with the sponsors that we must endeavor to ensure that all workers are paid fairly and do not receive a lower wage because of their gender or any other immutable characteristic that has no bearing on how they will perform in their job. This year, I signed SB 358 that gives California the strongest equal pay law in the nation. This bill, however, broadly prohibits employers from obtaining relevant AB 1676 Page I information with little evidence that this would assure more equitable wages. Let's give SB 358 a chance to work before making further changes." SB 358 (Jackson) Chapter 546, Statutes of 2015 strengthens the California Equal Pay Act by, among other things, clarifying the relative burdens of proof and prohibiting retaliation against employees for disclosing or discussing their wages with co-workers. REGISTERED SUPPORT / OPPOSITION: Support 9 to 5 California Alliance of Californians for Community Empowerment American Association of University Women Attorney General Kamala D. Harris California Asset Building Coalition California Child Care Resource and Referral Network California Domestic Workers Coalition AB 1676 Page J California Employment Lawyers Association California Federation of Teachers California Latinas for Reproductive Justice California Partnership California Women's Law Center California Work and Family Coalition Child Care Law Center Courage Campaign Equal Rights Advocates Legal Aid Society Employment Law Center LIUNA Locals 777 & 792 Mujeres Unidas Y Activas National Council of Jewish Women- California AB 1676 Page K Parent Voices Raising California Together Santa Clara County Board of Supervisors Santa Clara County Commission on the Status of Women The Association on the California Commission for Women The Center for Popular Democracy The Opportunity Institute Tradeswomen, Inc. Voices for Progress Western Center on Law and Poverty Women's Foundation of California Opposition AB 1676 Page L Agricultural Council of California California Asian Pacific Chamber of Commerce California Association for Health Services at Home California Association of Winegrape Growers California Business Properties Association California Chamber of Commerce California Farm Bureau Federation California Hotel and Lodging Association California League of Food Processors California Manufacturers and Technology Association California Newspaper Publishers Association California Professional Association of Specialty Contractors California Restaurant Association AB 1676 Page M California Retailers Association California State Association Counties California State Council of the Society of Human Resource Management California Travel Association California Trucking Association Camarillo Chamber of Commerce Carlsbad Chamber of Commerce Chambers of Commerce Alliance Ventura and Santa Barbara Counties Civil Justice Association of California Desert Hot Springs Chamber of Commerce El Centro Chamber of Commerce & Visitors Bureau Greater Conejo Valley Chamber of Commerce Greater Fresno Area Chamber of Commerce AB 1676 Page N Greater Riverside Chambers of Commerce Greater San Fernando Valley Chamber of Commerce Lake Tahoe South Shore Chamber of Commerce League of California Cities Motion Picture Association of America, Inc. National Federation of Independent Business Norco Area Chamber of Commerce & Visitors Center North Orange County Chamber Rancho Cordova Chamber of Commerce Redondo Beach Chamber of Commerce & Visitors Bureau Santa Ana Chamber of Commerce Santa Maria Valley Chamber of Commerce Visitor & Convention Bureau AB 1676 Page O South Bay Association of Chambers of Commerce Southwest California Legislative Council The Chamber of the Santa Barbara Region Torrance Area Chamber of Commerce Western Manufactured Housing Communities Association Wine Institute Analysis Prepared by:Taylor Jackson / L. & E. / (916) 319-2091