Dealing with Fair Pay Issues - California's SB 358

How can employers effectively address the law change to ensure their compensation programs are not running contrary to SB 358?

"Develop proactive strategies for compliance and defense of claims," says Richard Lane, President of Human Resources Strategies, Inc.

"Look at the pay ranges and ensure all individual salaries are within the pay range. If there are outliers, can they be justified with a reason free of sex bias?"

Jerry Brown signed SB 358 on Oct. 6, 2015 and the legislation became effective on January 1, 2016. The law lowers the standard for a plaintiff to establish an unlawful pay differential and has resulted in California companies taking a closer look at pay practices. One of the more dramatic results of this review occurred at Salesforce, a cloud computing company that reviewed 17,000 positions and spent $3.1 million to ensure female employees' salaries were equal to men.

"This requires companies to take a structured approach to organizing and assigning jobs," Richard Lane stated. "This includes conducting a thorough compensation audit that includes reviewing job descriptions, policies and practices, performance management systems, performance history and pay increases."

These reviews are complex and require skilled compensation expertise to ensure meeting the spirit and letter of SB 358. SB 358 requires the employer pay the same for "substantially similar" work when viewed as a composite of skill, effort and responsibility. The comparison can include any of the employers' locations, allowing employees to compare their pay to employees who do not perform the same work or are not in the same location.

There are legitimate arguments for wage differentials. Exceptions include:

seniority system,
merit system,
systems that measure earnings by quantity or quality of production,
and/or other bona fide (nondiscriminatory) factors.

The implication of fair pay legislation is not confined to California. Nation-wide the Obama administration is proposing large companies disclose employee compensation segregated by gender, ethnicity and race by September 2017. This represents a significant departure from the traditional approach of keeping employee pay confidential.

Key impacts of the California law include:

Lowers the standard for a plaintiff to establish unlawful pay differential
Shifts the burden of proof to the employer to justify pay differential
Results in more wage claims, individual law suits, and class actions

The burden of proof also changes in the new law, requiring plaintiffs to show different pay under the "substantially similar" work standard. The employer must affirmatively demonstrate a legitimate (nondiscriminatory) differential, that each factor relied upon is reasonably applied and that one or more factors relied upon account for the entire differential.

Remedies under the new law are also significant and include back wages, liquidated damages equal to back wages, interest, and attorney's fees and costs. There is a two year statute of limitation, and three years if a willful violation is determined.

If you need assistance developing a proactive strategy for compliance with SB 358, contact Richard Lane at 909-260-2765.


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	Dealing with Fair Pay Issues - California's SB 358 How can employers effectively address the law change to ensure their compensation programs are not running contrary to SB 358? "Develop proactive strategies for compliance and defense of claims," says Richard Lane, President of Human Resources Strategies, Inc. "Look at the pay ranges and ensure all individual salaries are within the pay range. If there are outliers, can they be justified with a reason free of sex bias?" Jerry Brown signed SB 358 on Oct. 6, 2015 and the legislation became effective on January 1, 2016. The law lowers the standard for a plaintiff to establish an unlawful pay differential and has resulted in California companies taking a closer look at pay practices. One of the more dramatic results of this review occurred at Salesforce, a cloud computing company that reviewed 17,000 positions and spent $3.1 million to ensure female employees' salaries were equal to men. "This requires companies to take a structured approach to organizing and assigning jobs," Richard Lane stated. "This includes conducting a thorough compensation audit that includes reviewing job descriptions, policies and practices, performance management systems, performance history and pay increases." These reviews are complex and require skilled compensation expertise to ensure meeting the spirit and letter of SB 358. SB 358 requires the employer pay the same for "substantially similar" work when viewed as a composite of skill, effort and responsibility. The comparison can include any of the employers' locations, allowing employees to compare their pay to employees who do not perform the same work or are not in the same location. There are legitimate arguments for wage differentials. Exceptions include: seniority system, merit system, systems that measure earnings by quantity or quality of production, and/or other bona fide (nondiscriminatory) factors. The implication of fair pay legislation is not confined to California. Nation-wide the Obama administration is proposing large companies disclose employee compensation segregated by gender, ethnicity and race by September 2017. This represents a significant departure from the traditional approach of keeping employee pay confidential. Key impacts of the California law include: Lowers the standard for a plaintiff to establish unlawful pay differential Shifts the burden of proof to the employer to justify pay differential Results in more wage claims, individual law suits, and class actions The burden of proof also changes in the new law, requiring plaintiffs to show different pay under the "substantially similar" work standard. The employer must affirmatively demonstrate a legitimate (nondiscriminatory) differential, that each factor relied upon is reasonably applied and that one or more factors relied upon account for the entire differential. Remedies under the new law are also significant and include back wages, liquidated damages equal to back wages, interest, and attorney's fees and costs. There is a two year statute of limitation, and three years if a willful violation is determined. If you need assistance developing a proactive strategy for compliance with SB 358, contact Richard Lane at 909-260-2765.
Copyright 2011- Human Resources Strategies, Inc.