BILL ANALYSIS Ó
SB 1063
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Date of Hearing: June 22, 2016
ASSEMBLY COMMITTEE ON LABOR AND EMPLOYMENT
Roger Hernández, Chair
SB
1063 (Hall) - As Amended April 20, 2016
SENATE VOTE: 26-13
SUBJECT: Conditions of employment: wage differential: race or
ethnicity
SUMMARY: Expands the prohibitions laid down in the California
Equal Pay Act regarding gender, to include discrimination based
on race or ethnicity. Specifically, this bill:
1)Prohibits an employer from paying 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.
2)Provides exceptions for when the employer demonstrates the
wage differential is based upon one or more of the following
factors, each factor relied upon is applied reasonably and the
one or more factors relied upon account for the entire wage
differential:
a) A seniority system
b) A merit system
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c) A system that measures earnings by quantity or quality
of production
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.
e) For purposes of these provisions, "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 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.
EXISTING LAW:
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, unless the employer demonstrates
that specific, reasonably applied factors account for the
entire wage differential.
2)Authorizes an employee paid lesser wages in violation of this
prohibition to file a complaint with the Division of Labor
Standards Enforcement, and authorizes the employee, the
division, or the Department of Industrial Relations to
commence a civil action for the wages the employee was
deprived of because of the violation, interest on those wages,
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and liquidated damages.
3)Provides that an employer or other person who violates or
causes a violation of that prohibition, or who reduces the
wages of any employee in order to comply with that
prohibition, is guilty of a misdemeanor.
FISCAL EFFECT: According to the Senate Appropriations
Committee, the Department of Industrial Relations (DIR)
indicates that the potential increase in workload resulting from
the bill is unknown. However, as an order of magnitude, if one
percent of the claims currently filed at the Department of Fair
Employment and Housing (DFEH) are instead filed with DIR's Labor
Commissioner, DIR estimates that this bill could administrative
costs of $601,000 in the first year and $570,000 in subsequent
years (special fund).
COMMENTS: 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.
Relation to SB 358 (Jackson) Chapter 546, Statutes of 2015
This bill adopts an identical approach to SB 358 in addressing
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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.
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Data regarding Fair Pay differentials among minorities and women
The National Women's Law Center issued a report<1> in 2013
focused on the issue of fair pay. The report argues that, "The
lowest-paid workers in the labor market, those paid the federal
minimum wage or less, are about two-thirds women. The chances a
worker earning the federal tipped minimum wage of $2.13 an hour
is a woman are roughly the same. Women of color are
disproportionately represented among female minimum wage
workers: African-American women were just under 13 percent and
Hispanic women were just under 14 percent of all employed women
in 2012, but more than 15 percent of women paid the minimum wage
were African-American and more than 18 percent were Hispanic.
Most women paid the minimum wage are not relying on a spouse's
income."
Arguments in Support
---------------------------
<1>
50 Years & Counting: The Unfinished Business of Achieving Fair
Pay. The National Women's Law Center: June 2013, Washington D.C.
http://www.nwlc.org/sites/default/files/pdfs/final_nwlc_equal_pay
_report.pdf
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California National Organization for Women (NOW) is the sponsor
of this measure and writes in support, "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 Hispanic or
Latina women make just 54 cents for every dollar that a
Caucasian man earns. The wage gap isn't only between men and
women, as African American men earn just 75% of the average
salary of a Caucasian male worker.
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 population are facing devastating economic
inequality. No employee should be denied an equal wage for an
equal day of work. This bill 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."
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Arguments in Opposition
A coalition of employers, including the California Chamber of
Commerce, opposes this measure. They state, "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. As both the author of SB 358 and
numerous media outlets reported, SB 358 is the strongest equal
pay law for women in the country. SB 358 made several
significant amendments to existing law to accomplish this goal,
including changing the term "equal" to "substantially similar,"
clarifying the definitions of "bona fide factor" and "business
necessity," and the burdens of proof for the parties. These 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. Governor Brown echoed this same sentiment when he
vetoed AB 1017 (Campos) last year? We need to give SB 358
sufficient time to determine whether the changes made to Labor
Code Section 1197.5 work and how it impacts the litigation
environment before we expand its provisions.
Employees who believe they have been discriminated against with
regard to pay may still seek relief under the Fair Employment
and Housing Act (FEHA), which provides a list of remedies
including: compensatory damages, injunctive relief, declaratory
relief, punitive damages, and attorney's fees. FEHA covers all
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protected classifications, including race and ethnicity."
Previous Related Legislation
AB 1676 (Campos) from 2016 would specify that prior salary
cannot, by itself, justify any disparity in compensation. AB
1676 is pending hearing before the Senate Labor and Industrial
Relations Committee.
AB 1017 (Campos) from 2015 would have prohibited an employer
from seeking salary history information about an applicant for
employment. 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
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:
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Support
American Association of University Women California (co-sponsor)
American Civil Liberties Union of California
American Federation of State, County and Municipal Employees
Black Women Organized for Political Action
Ca State Conference of the National Association for the
Advancement of Colored People
California Black Women's Health Project
California Catholic Conference, Inc.
California Domestic Workers Coalition
California Employment Lawyers Association
California Federation of Teachers
California Immigrant Policy Center
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California Labor Federation, AFL-CIO
California National Organization for Women (sponsor)
California Reinvestment Coalition
California Teachers Association
Centro Laboral de Graton
City of Compton
Coalition for Humane Immigrant Rights of Los Angeles
Courage Campaign
Equal Rights Advocates
Greater Sacramento Urban League
Legal Aid Society Employment Law Center
Los Angeles County Federation of Labor
Los Angeles County Professional Peace Officers Association
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Mexican American Legal Defense and Education Fund
National Coalition of 100 Black Women, Inc. - Sacramento Chapter
Numerous Individuals
Rainbow Services
Sacramento National Organization for Women
San Diego County Court Employees Association
San Luis Obispo County Employees Association
Service Employees International Union
The Greenlining Institute
The Organization of SMUD Employees
The Women's Foundation of California
United Domestic Workers of America/AFSCME Local 3930
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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 Retailers Association
California State Association of Counties
California Travel Association
Civil Justice Association of California
League of California Cities
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National Federation of Independent Business
Western Electrical Contractors Association, Inc
Western Growers Association
Analysis Prepared by:Taylor Jackson / L. & E. / (916)
319-2091