BILL ANALYSIS                                                                                                                                                                                                    Ó





          SENATE COMMITTEE ON LABOR AND INDUSTRIAL RELATIONS
                             Senator Tony Mendoza, Chair
                                2015 - 2016  Regular 

          Bill No:               SB 1063      Hearing Date:    April 13,  
          2016
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          |Author:    |Hall                                                 |
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          |Version:   |February 16, 2016                                    |
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          |Urgency:   |No                     |Fiscal:    |Yes              |
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          |Consultant:|Brandon Seto                                         |
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          Subject:  Conditions of employment:  wage differential:  race or  
                                      ethnicity


          KEY ISSUE
          
          Should the Legislature amend the Equal Pay Act to prohibit  
          employers from paying employees a wage rate less than the rate  
          paid to employees of a different race or ethnicity for  
          substantially similar work?
          
          
          ANALYSIS
          
           Existing law  
           
                  Prohibits an employer from requiring an employee to  
               refrain from disclosing the amount of his or her wages, or  
               discharging, formally disciplining, or otherwise  
               discriminating against an employee who discloses the amount  
               of his or her wages (Labor Code §232).

                 States that 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  








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               responsibility, and performed under similar working  
               conditions.

                 The only exceptions to this standard are when the wage  
               differential is based upon one or more of the following  
               factors:

                       1)             A seniority system.

                       2)             A merit system.

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

                       4)             A bona fide factor other than sex,  
                         such as education, training, or experience which  
                         only applies if the employer demonstrates that it  
                         is not based on a sex-based differential in  
                         compensation, is job related, and is consistent  
                         with a business necessity. "Business necessity"  
                         means an overriding legitimate business purpose  
                         which the factor relied upon effectively  
                         fulfills. This does not apply if the employee  
                         demonstrates that an alternative business  
                         practice would serve the same business purpose  
                         without producing the wage differential.
          (Labor Code §1197.5)

                 Each factor relied upon to explain the wage differential  
               must be applied reasonably and account for the entire wage  
               differential (Labor Code §1197.5).

                 States that any employer who violates the above section  
               is liable for 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 (Labor Code  
               §1197.5).

                 Requires that employers maintain records of the wages  
               and wage rates, job classifications, and other terms and  
               conditions of employment of the persons employed by the  
               employer (Labor Code §1197.5).

                 States that the Division of Labor Standards Enforcement  







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               may also commence and prosecute 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  
               (Labor Code §1197.5).

                 Specifies 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 required by Section 1197.5  
               is guilty of a misdemeanor and is punishable by a fine of  
               not more than $10,000 or by imprisonment for not more than  
               six months (Labor Code §1199.5).
           
          This Bill  
          
          Expands the prohibitions laid down in the Equal Pay Act to  
          include discrimination based on race or ethnicity. By adding  
          these provisions, this bill, among other things:

                 Duplicates the provisions laid down in the Equal Pay Act  
               regarding gender, but restates them to prevent wage rate  
               discrimination based on race or ethnicity.

                 Mirrors the enforcement mechanism and penalties for wage  
               rate discrimination based on gender and includes  
               discrimination based on race or ethnicity.

          
          COMMENTS
          
          1.  Need for this bill?

            The author believes that the Equal Pay Act, in its current  
            form, fails to address the multifaceted consequences of biases  
            that permeate every aspect of our society.
            While it is an improvement on the original Equal Pay Act, it  
            still does not recognize that wage discrimination is not  
            confined to women. 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 as well. Ideally, other protected classes, such as members  
            of the LGBTQ or disabled community should be included in this  
            remedy, but the addition of race and ethnicity begins the  
            process of making pay equity in California more inclusive. 








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          2.  This Bill's Relationship to SB 358 (Jackson, 2015)
             
            This bill adopts an identical approach to SB 358 in addressing  
            wage discrimination.  It places the responsibility on the  
            employer to prove or demonstrate that a wage differential  
            between employees is not occurring as a result of a worker's  
            race or ethnicity. Additionally, this bill uses the  
            definitions specified in SB 358 regarding the nature of  
            "business necessity" and "substantially similar work" to close  
            perceived loopholes in the law which were used to justify  
            discriminatory wage rate differentials.  

            "Business necessity" is taken to mean an overriding legitimate  
            business purpose which validates a wage variance, such as  
            paying someone more because they possess a higher degree which  
            is essential to their duties. Only under this definition does  
            "business necessity" justify wage rate differences. Also, in  
            SB 358 "substantially similar work" replaced "equal work" as a  
            comparative term for wage rates. This removed the ability of  
            employers to use different titles in order to justify paying  
            unequal wage rates for people who were doing similar work.  
            Overall, this bill broadens the specifications set down in SB  
            358 and applies them to racial and ethnic protections. 


          3.   Proponent Arguments  :
            
            Proponents argue that despite being the most diverse and  
            prosperous state in the nation, many California workers  
            continue to suffer from a chronic racial and ethnic wage gap.  
            A 2013 study revealed that Asian American women make 90 cents,  
            African American women make 64 cents, and Latina women make  
            just 54 cents for every dollar that a white man earns. The  
            wage gap is not only between men and women, as African  
            American men earn just 75% of the average salary of a white  
            male.

            Proponents state that last year, SB 358 (Jackson) began to  
            address wage inequality by prohibiting employers from paying  
            employees a wage rate less than the rates paid to employees of  
            the opposite sex for substantially similar work. However, gaps  
            in the law still persist. The 65-year old California Equal Pay  
            Act fails to include one of the largest factors for wage  
            inequity - race and ethnicity. As California continues to grow  
            and diversify, large segments of our state's minority  







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            population are facing devastating economic inequality. No  
            employee should be denied an equal wage for an equal day of  
            work. SB 1063 builds upon the important steps California has  
            taken to address wage inequality and will set a national  
            standard to ensure that every worker is paid a fair and  
            equitable wage.

          4.  Opponent Arguments  :

            Opponents point out that SB 358 (Jackson), which expanded and  
            strengthened Labor Code Section 1197.5 regarding equal pay for  
            women, just went into effect at the beginning of this year.   
            SB 358 is the strongest equal pay law for women in the  
            country. The new standards introduced by SB 358 will likely be  
            tested over the next several years in litigation.  In fact,  
            there is already a class- action lawsuit pending alleging an  
            equal pay violation with regard to female attorneys in the  
            insurance industry.  While we believe that no employee should  
            be paid differently based upon any protected classification,  
            we believe that the Legislature should allow time for  
            employees, employers, and the courts to interpret and  
            implement the new boundaries of the equal pay law before  
            seeking to amend and expand it even further.  

            Opponents believe that the Legislature needs to give SB 358  
            sufficient time to determine whether its changes work and how  
            they impact the litigation environment before its provisions  
            are expanded. Employees who believe they have been  
            discriminated against with regard to pay may still seek relief  
            under the Fair Employment and Housing Act (FEHA). FEHA covers  
            all protected classifications, including race and ethnicity.


          5.  Prior Legislation  :

            SB 358 (Jackson), Chapter 546, Statutes of 2015 made various  
            changes to the California Equal Pay Act related to gender wage  
            inequality including standards relating to employer proof of  
            non-discrimination and replacing the qualification for  
            discriminatory treatment while performing "equal work" with  
            "substantially similar work."


          SUPPORT
          







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          California National Organization for Women (Sponsor)
          American Association of University Women California
          American Civil Liberties Union of California
          California Domestic Workers Coalition
          California Federation of Teachers
          California Labor Federation, AFL-CIO
          California Reinvestment Coalition
          Centro Laboral de Graton
          Coalition for Humane Immigrant Rights of Los Angeles
          Equal Rights Advocates
          Greater Sacramento Urban League
          Los Angeles County Professional Peace Officers Association
          National Coalition of 100 Black Women, Inc. Sacramento Chapter
          Rainbow Services
          San Diego County Employees Association
          San Luis Obispo County Employees Association
          The Greenlining Institute
          The Organization of SMUD Employees
          The Women's Foundation of California
          United Domestic Workers of America/AFSCME Local 3930
          

          OPPOSITION
          
          Agricultural Council of California 
          California Bankers Association
          California Chamber of Commerce
          California League of Food Processors
          California Manufacturers & Technology Association
          California Pool and Spa Association
          California Restaurant Association
          California State Association of Counties
          California Travel Association
          Civil Justice Association of California
          League of California Cities 
          National Federation of Independent Business
          Western Electrical Contractors Association, Inc
                                          
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