BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | SB 358| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: SB 358 Author: Jackson (D), et al. Amended: 5/12/15 Vote: 21 SENATE LABOR & IND. REL. COMMITTEE: 4-0, 4/22/15 AYES: Mendoza, Jackson, Leno, Mitchell NO VOTE RECORDED: Stone SENATE JUDICIARY COMMITTEE: 5-1, 4/28/15 AYES: Jackson, Hertzberg, Leno, Monning, Wieckowski NOES: Anderson NO VOTE RECORDED: Moorlach SENATE APPROPRIATIONS COMMITTEE: 5-0, 5/18/15 AYES: Lara, Beall, Hill, Leyva, Mendoza NO VOTE RECORDED: Bates, Nielsen SUBJECT: Conditions of employment: gender wage differential SOURCE: Author DIGEST: This bill revises the California Equal Pay Act to prohibit an employer from paying any of its employees at wage rates less than 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. This bill also revises the "bona fide factor" exception in existing law to require the employer to prove: (1) the factor is not based on or derived from a sex-based differential in compensation and is consistent with a business SB 358 Page 2 necessity, as specified; such as difference in education, training, or experience that is job related with respect to the position in question; (2) each factor relied upon is applied reasonably; and (3) the factors relied upon account for the entire pay differential. This bill defines "business necessity" as an overriding legitimate business purpose such that the factor relied upon effectively fulfills the business purpose it is supposed to serve. This bill also prohibits discrimination or retaliation against an employee who inquires about the wages paid to other employees. ANALYSIS: Existing law, under the California Equal Pay Act (Act): 1)Prohibits an employer from paying any 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, except 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. (Labor Code §1197.5(a).) 2)States that any employer who violates the above section is liable to the amount of the employee's wages and interest that the employee is deprived in addition to liquidated damages, administered and enforced by the Division of Labor Standards Enforcement (DLSE) which may supervise the payment of wages and interest found to be due. (Labor Code §1197.5) 3)Requires every employer to maintain records of the wages and wage rates, job classifications, and other terms and conditions of employment of the persons employed by the employer, which must be kept on file for two years. (Labor Code §1197.5(d).) 4)Authorizes any employee to file a complaint with the DLSE that the wages paid are less than the wages to which the employee is entitled under the Act, and the DLSE is required to investigate these complaints, as specified. (Labor Code SB 358 Page 3 §1197.5(e).) 5)Authorizes the Department of Industrial Relations (DIR) or the DLSE to 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 for violations of the Act, and are entitled to recover costs of suit. (Labor Code §1197.5(f).) 6)Provides that any employee receiving less than the wage to which the employee is entitled 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. (Labor Code §1197.5(g).) 7)Provides that a civil action to recover wages under the Act 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. (Labor Code §1197.5(h).) 8)Bars an employer from requiring an employee to refrain from disclosing the amount of his or her wages, requiring an employee to sign a waiver or other document that denies the employee the right to disclose the amount of his or her wages or discharge, or formally disciplining, or otherwise discriminating against an employee who discloses the amount of his or her wages. (Labor Code §232) This bill: 1)Prohibits an employer from paying 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: a) The pay differential is based upon one or more of the following factors: i) A seniority system; SB 358 Page 4 ii) A merit system; iii) A system that measures earnings by quantity or quality of production; or iv) A bona fide factor that is not based on or derived from a sex-based differential in compensation and is consistent with a business necessity, as defined, such as a difference in education, training, or experience that is job related with respect to the position in question; b) Each factor relied upon is applied reasonably; and c) The one or more factors relied upon account for the entire pay differential. 2)Extends the employer's record retention requirement from two to three years. 3)Prohibits an employer from discharging, or in any manner discriminating or retaliating against, any employee by reason of any action taken by the employee to invoke or assist in any manner the enforcement of the Act. 4)Makes it unlawful for an employer to prohibit an employee from disclosing the employee's own wages, discussing the wages of others, or inquiring about another employee's wages if the purpose of the disclosure, discussion, or inquiry is to invoke or enforce the rights granted by this bill. 5)Extends the existing enforcement mechanisms, as specified, for wage discrimination under the Act to claims for retaliation, and provides a one-year statute of limitations for retaliation claims. 6)Authorizes 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 the Act to 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. SB 358 Page 5 Also requires a civil action to recover wages for retaliation to be commenced no later than one-year after the cause of action occurs. 7)Makes various related legislative findings and declarations and makes several technical, non-substantive changes. Background Research on gender pay disparity . According to the American Association of University Women (AAUW) for full-time year-round work today that number stands at 78% for women compared to their male counterparts. AAUW also ranked the wage gap for individual states in the U.S., California ranking 5th with a gap of 84%. AAUW also noted that the pay gap is worse for women of color, with Hispanic and African American women making 54% and 64% of white men's earnings respectively. This gap has narrowed due to various factors, including women's progress in education as well as workforce participation. A study from Francine D. Blau and Lawrence M. Khan, "The Gender Pay Gap: Have Women Gone as Far as They Can?" discuss that while factors such as educational attainment, experience, demographic characteristics, job type, industry, or union status explain about 49% of the wage gap, 41% of the gap is not explained by such factors. Meaning 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% of men's wages - an 8% unexplained difference that 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%. Legislative efforts 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 SB 358 Page 6 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 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. FISCAL EFFECT: Appropriation: No Fiscal Com.:YesLocal: Yes According to the Senate Appropriations Committee, the DIR indicates that it will incur costs of $127,000 in 2015-16 and $120,000 ongoing (special funds) to implement the provisions of this bill. SUPPORT: (Verified5/20/15) 9to5 California, National Association of Working Women 9to5, National Association of Working Women Alliance of Californians for Community Empowerment American Association of University Women American Association of University Women - California Bet Tzedek Legal Services Business & Professional Women of Nevada County California Child Care Resource and Referral Network California Employer Law Center California Federation of Teachers, AFT, AFL-CIO California Labor Federation, AFL-CIO California Nurses Association California Partnership California Rural Legal Assistance Foundation, Inc. California School Employees Association, AFL-CIO SB 358 Page 7 California Women Lawyers California Women's Law Center California Work and Family Coalition Career Ladders Project Center for Popular Democracy Centro Legal de la Raza Child Care Law Center Communications Workers of America, AFL-CIO, CLC Local 9003 Communications Workers of America, ALF-CIO, District 9 Community Action Fund of Planned Parenthood of Orange and San Bernardino Counties Consumer Attorneys of California Council on American-Islamic Relations, California Chapter County of Santa Cruz, Board of Supervisors Courage Campaign Glendale City Employees Association La Raza Centro Legal Maintenance Cooperation Trust Fund Monterrey County Board of Supervisors Mujeres Unidas y Activas National Council of Jewish Women-CA National Domestic Workers Alliance National Partnership for Women & Families National Women's Law Center Organization of SMUD Employees Parent Voices Planned Parenthood Action Fund of Santa Barbara, Ventura & San Luis Obispo Counties Planned Parenthood Action Fund of the Pacific Southwest Planned Parenthood Affiliates of California Planned Parenthood Northern California Action Fund Raising California Together Redlands Area Democratic Club Restaurant Opportunities Centers United San Bernardino Public Employees Association San Diego County Court Employees Association San Francisco Unified School District San Luis Obispo County Employees Association TradesWomen Inc. Ultra Violet Western Center on Law and Poverty Women in Non Traditional Employment Roles Women's Foundation of California Women's Law Project SB 358 Page 8 OPPOSITION: (Verified5/20/15) None received ARGUMENTS IN SUPPORT: Proponents note that ending the gender wage gap would cut the poverty rate for working single mothers by nearly half, from 28.7% to 15%. They note that as a group working women in California lose over $33 billion each year, with the problem even worse for women of color. Proponents argue that existing laws have been ineffective in closing the gender-based pay gap, noting that the California Equal Pay Act has been in effect for over 65 years, with the last revision in 1985. Proponents contend that its protections sorely need to be strengthened and updated. Proponents argue that SB 358 will strengthen California's existing Equal Pay Act by eliminating loopholes that prevent effective enforcement and powering employees to discuss pay without fear of retaliation. Proponents specifically argue that SB 358 will ensure employees performing substantially equivalent work are paid fairly by requiring equal pay for work of a comparable character, eliminating the outdated same establishment requirement, by replacing the any bona fide factor other than sex catch-all defense with more specific affirmative defenses and strengthen protections for workers who inquire about or discuss their wages or those of their coworkers. Prepared by:Deanna Ping / L. & I.R. / (916) 651-1556 5/20/15 16:50:31 **** END ****