BILL ANALYSIS Ó SB 358 Page 1 Date of Hearing: June 24, 2015 ASSEMBLY COMMITTEE ON LABOR AND EMPLOYMENT Roger Hernández, Chair SB 358 (Jackson) - As Amended May 12, 2015 SENATE VOTE: 38-0 SUBJECT: Conditions of employment: gender wage differential. SUMMARY: Makes various changes to the California Equal Pay Act related to gender wage inequality. Specifically, 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; ii) A merit system; SB 358 Page 2 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. c) The one or more factors relied upon account for the entire wage 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 law. 4)Makes it unlawful for an employer to 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 the law. 5)Extends the existing enforcement mechanisms, as specified, for wage discrimination under existing law 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 SB 358 Page 3 her employment because the employee engaged in any conduct delineated in the law 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. 7)Makes related legislative findings and declarations. 8) Makes several technical, non-substantive changes. EXISTING LAW: 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 law, and the DLSE is required to SB 358 Page 4 investigate these complaints, as specified. (Labor Code §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 law, 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 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) FISCAL EFFECT: According to the Senate Appropriations Committee, the Department of Industrial Relations 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. COMMENTS: According to the author, while California has laws SB 358 Page 5 which attempt to address pay inequality (including the California Equal Pay Act), these provisions contain out-of-date terms as well as loopholes that make it difficult to enforce in practice. In addition, while other Labor Code provisions prohibit retaliation against employees for disclosing wages, there is currently no specific protection for inquiring about the wages of other employees if the purpose of such inquiry is to exercise one's right to be paid equally for equal work. Therefore, this bill would require equal pay for work "of a comparable character," revise other provisions of existing law and discourage pay secrecy by explicitly prohibiting retaliation or discrimination against employees who disclose, discuss, or inquire about their own or co-workers' wages for the purpose of enforcing their rights under the Equal Pay Act. The legislative findings and declarations contained in this bill state: "In 2014, the gender wage gap in California stood at 16 cents on the dollar. A woman working full time year round earned an average of 84 cents to every dollar a man earned. This wage gap extends across almost all occupations reporting in California. This gap is far worse for women of color; Latina women in California make only 44 cents for every dollar a white male makes, the biggest gap for Latina women in the nation. While the state's overall wage gap is slightly lower than the national average of 78 cents to the dollar, the persistent disparity in earnings still has a significant impact on the economic security and welfare of millions of working women and their families. Collectively, women working full time in California lose approximately $33,650,294,544 each year due to the gender wage gap. The wage gap contributes to the higher SB 358 Page 6 statewide poverty rate among women, which stands at 18 percent, compared to approximately 15 percent for men, and the poverty rate is even higher for women of color and single women living with children. California has prohibited gender-based wage discrimination since 1949. Section 1197.5 of the Labor Code was enacted to redress the segregation of women into historically undervalued occupations, but it has evolved over the last four decades so that it is now virtually identical to the federal Equal Pay Act of 1963 (29 U.S.C. Sec. 206(d)). However, the state provisions are rarely utilized because the current statutory language makes it difficult to establish a successful claim. Pay secrecy also contributes to the gender wage gap, because women cannot challenge wage discrimination that they do not know exists. Although California law prohibits employers from banning wage disclosures and retaliating against employees for engaging in this activity, in practice many employees are unaware of these protections and others are afraid to exercise these rights due to potential retaliation." Recent Research on Gender Pay Disparity According to the American Association of University Women (AAUW) a woman working full-time for year-round work earns 78 cents for every dollar earned by a male counterpart. AAUW also ranked the wage gap for individual states in the U.S. and found that California ranks fifth with a gap of 84 percent. AAUW also noted that the pay gap is worse for women of color, with Hispanic and African American women making 54 percent and 64 percent of white men's earnings respectively. This gap has narrowed due to various factors, including women's SB 358 Page 7 progress in education as well as workforce participation. A recent study notes that, while factors such as educational attainment, experience, demographic characteristics, job type, industry, or union status explain about half of the wage gap, 41 percent of the gap is not explained by such factors. This means 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 researchers suggest could be influenced by discrimination. A 2013 Congressional Research Service report entitled "Pay Equity: Legislative and Legal Developments," found an unexplained earnings differential of between 5 percent and 7 percent. Federal and State Legislative Efforts At the 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 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 SB 358 Page 8 state Equal Pay Acts with standards of equal pay for work of a substantially similar or comparable character. ARGUMENTS IN SUPPORT Supporters state that ending the gender wage gap would cut the poverty rate for working single mothers by nearly half, from 28.7 percent to 15 percent. 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. Supporters 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. Supporters contend that its protections sorely need to be strengthened and updated. Supporters argue that this bill 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. Supporters specifically argue that this bill 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. OPPOSE UNLESS AMENDED SB 358 Page 9 The California National Organization for Women (NOW) writes that while this bill goes a long way towards addressing the substantive inequities of the original Equal Pay Act, these improvements "must be accompanied by a broadening of claimants to include all forms of invidious wage discrimination." They go on to state: "There is no excuse in 2015 for limiting redress for compensation differentials to a select group of women workers. Women of color, who are paid less than white women, should be able to make a claim under California's Equal Pay Act. Men of color, who are paid less than white men, should be able to make a claim under California's Equal Pay Act. Members of the LGBTQ or disabled community paid less than their cis-gender or able bodied counterparts should be able to make a claim under California's Equal Pay Act." Therefore, California NOW opposes this bill unless amended to include protections for wage discrimination based on these additional categories. In response, the author's office has provided the following statement: SB 358 Page 10 "The author notes that the letter submitted by the California National Organization for Women (California NOW) states that "SB 358, in its current state goes a long way in addressing the substantive inequities of the original Equal Pay Act's elements and defenses. . . ." This was the intended scope of this bill. In addition, on June 29, 2014, the National Organization for Women submitted a resolution supporting the federal Fair Paycheck Act, the provisions of which were used to model this bill, and lobbied Congress to pass that Act. (See National Organization for Women, Resolution on the Fair Paycheck Act (June 29, 2014) ?Accordingly, the author is unable to further respond as to why the California chapter of that organization is opposed to enacting state legislation that is not only described as beneficial in the letter from the California chapter, but also furthers the national organization's resolution." REGISTERED SUPPORT / OPPOSITION: Support 9to5 California, National Association of Working Women 9to5, National Association of Working Women SB 358 Page 11 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 Chamber of Commerce CalAsian Chamber of Commerce California Child Care Resource and Referral Network California Employer Law Center California Employment Lawyers Association (co-sponsor) California Federation of Teachers, AFT, AFL-CIO California Hospital Association California Immigrant Policy Center California Labor Federation, AFL-CIO SB 358 Page 12 California Newspaper Publishers Association California Nurses Association California Partnership California Rural Legal Assistance Foundation, Inc. California School Employees Association, AFL-CIO 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 Civil Justice Association of California SB 358 Page 13 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 Equal Rights Advocates (co-sponsor) Glendale City Employees Association La Raza Centro Legal Legal Aid Society Employment Law Center (co-sponsor) Maintenance Cooperation Trust Fund Monterrey County Board of Supervisors SB 358 Page 14 Mujeres Unidas y Activas National Association of Social Workers, CA Chapter National Council of Jewish Women-CA National Domestic Workers Alliance National Partnership for Women & Families National Women's Law Center Numerous Individuals 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 SB 358 Page 15 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 SB 358 Page 16 Women's Law Project Opposition (unless amended) California National Organization of Women Analysis Prepared by:Ben Ebbink / L. & E. / (916) 319-2091