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This blog post was authored by Michael Lehman.

Legislation has been in place in California for decades preventing disparity in wages between men and women for doing the same job. The primary statute, Labor Code section 1197.5, is expected to be revised soon when Governor Brown signs a bill into law that would revise certain parts of that section, largely tightening exemptions for employers and creating longer record-keeping requirements.

According to a study cited by the sponsor of the bill, the difference in pay between men and women in California in 2014 was sixteen cents on the dollar. Under the current law, the equal pay analysis is made between men and women who work in the same establishment. Under the new law, however, the burden of proving gender discrimination in pay would no longer require that the pay comparison occur between men and women working in the same establishment.

Employers could still claim a bona fide reason for pay differentials for substantially similar work if the reason for paying lower wages is because that establishment is located in an area where the cost of living is less than the compared area where the cost of living is higher. For example, a female worker in a plant in Tulare, California could arguably make less than a male counterpart who works for the same employer in a plant in Los Angeles because of the higher cost of living in Los Angeles.

Until now, the statute has been somewhat vague in defining work comparison. The new statute would require equal pay for “substantially similar work, when viewed as a composite of skill, effort, and responsibility, and performed under similar working conditions.”

The revised statute, however, would provide an out for the employer. A wage differential could be based upon: (1) a seniority system; (2) a merit system; (3) a system that measures earnings by quantity or quality of production; and (4) a bona fide factor other than sex such as education, training, or experience. This last exemption would require that the employer demonstrate that the factor is not based on or derived from a sex-based differential and that compensation is job-related with respect to the position in question and consistent with a business necessity. In order to prove business necessity, the employer would have to show an overriding legitimate business purpose such that the factor (e.g., training, education) relied upon effectively fulfills the business purpose it is supposed to serve. An employee could then demonstrate that an alternative business practice exists which would serve the same business purpose without producing the wage differential.

An employer who violates the wage differential would be liable to the employee affected in the amount of the differential and interest plus an additional equal amount as liquidated damages. The California Division of Labor Standards Enforcement will enforce this law, and could supervise the payment of wages and interest found to be due.

Under the new law, every employer would now have to maintain records of wages, wage rates, job classifications and other terms and conditions of employment of the persons employed for a period of three years rather than the current two years.

If the employee wants to file a complaint with the Division of Labor Standards Enforcement, they can do so and the division of Labor Standards Enforcement can prosecute civil actions on behalf of the employee. Additionally, any employee receiving less than the wage to which they believe they are entitled could recover the balance of the wages including interest thereon and liquidated damages on their own as long as they file suit within two years after their claim occurs (except where willful violation occurs where it could be three years after the cause of action occurs).

The statute also states that no employer can discharge or in any manner discriminate or retaliate against any employee when the employee attempts to enforce this section. The statute also states that an employer should not prohibit an employee from disclosing the employee’s 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 this section. This is obviously not as important for public sector employees whose wages are often made public in any event. Nothing in this section creates an obligation on the part of the employee to disclose their wages. If an employee is discharged, discriminated against, or retaliated against because of making a claim under this new law, the employee can bring a civil action within one year after the cause of action accrues.

All of this means it will be more important than ever to keep accurate records of the wages being paid to employees and make sure that any wage differential between men and women is supported by business necessity. As an employer, are you keeping records of your employees’ pay for three years? You should consider arranging now for human resources or legal counsel to look at your payroll practices to make sure you will be in compliance with the new statute, which is very likely to be signed into law soon.