What You Need to Know: The California Fair Pay Act

Wages Reflecting Value: The California Fair Pay Act

If you are a small business owner, you will want to pay attention to equal wage laws that are changing across the U.S. Equal wage laws say you must pay the same wages to employees that work the same job, regardless of their genders.

If the wages you pay men and women appear unfair, you could face legal consequences. As state lawmakers turn their focuses to fair pay issues, your business could be affected by new standards.

California Fair Pay Act

Recently, California state legislators passed a fair pay law amending the California Equal Pay Act. The law, effective January 1, 2016, will enforce tough, new wage requirements for employers.

Equal work versus similar work

Current federal equal pay laws require that men and women are paid the same wages for substantially equal work, done at the same physical location.

California takes regulations further, saying employers must pay employees equally for similar work done. Wages are paid according to the content of an employee’s work, not according to the employee’s job title.

Let’s say you own a restaurant. Your waiters and waitresses hold two different job titles. The duties each employee performs, however, are greatly similar. You must pay the same wages to waiters and waitresses. The new law prevents employers from justifying unequal wages paid based on job titles alone.

Rather than requiring an employee who is suing over unequal pay to justify the wages they think they deserve, the California Fair Pay Act requires an employer being sued to justify the wages they paid.

Exemptions from equal pay include wages based on seniority, merit, quality of production, or bona fide factors such as education, training, or experience.

Openly discuss wages

Under the new law, employees in California may openly discuss wages without fear of employer retaliation. Disclosing wage information opens the door for employees to investigate their pay rates. When employees can freely compare wages, unequal pay is easier to spot.

Pay equity

Though California’s new wage regulations fall under the state’s Equal Pay Act, fair pay law now focuses on pay equity. Pay equity means equal pay for work of equal value.This is different from equal pay, which requires equal pay for the same job.

With pay equity, men and women receive the same pay for doing work that is different, but requires equal levels of skill, knowledge, and responsibility, with the same working conditions.

Two federal laws maintain equal pay standards. The Equal Pay Act of 1963 requires equal wages for equal work performed by men and women. Title VII of the Civil Rights Act of 1964 protects workers from discrimination by sex, race, color, and religion.

Why does the California Fair Pay Act matter to you?

If your small business is not in California, you may think the law is not relevant to your company. Wage inequality, however, is an issue that stretches across the U.S. Nationally, women earn 79 cents to every dollar men earn.

The proposed Paycheck Fairness Act is a federal bill similar to the California Fair Pay Act, preventing unequal wages for similar work. Congress has not passed the bill yet.

Though a federal fair pay amendment remains stuck in Washington D.C., more and more states are taking control of their own fair pay laws. Across the country, legislators are passing new equal pay laws by state. In 2015, Connecticut, Delaware, North Dakota, and Oregon all signed new laws regarding equal pay.

As a small business owner, you are responsible for complying with equal wage laws. Be sure to stay up to date with your state’s fair pay standards.

Take these steps to be sure you are complying with fair pay laws:

  • Regularly conduct an audit of employee pay rates. Review all types of payment you provide, including salaries, bonuses, and benefits. Fringe benefits offered to one employee must be offered to all other employees.
  • Review your company’s pay policies and procedures. Look over job descriptions, employee handbooks, and evaluation processes. Do these documents match the expectations you have for your employees? You may find these materials need to be updated and your employees’ wages need to be adjusted.
  • Diversify job assignments. Do not divide tasks by traditional standards that determine what work is geared more toward men or women. Assign duties based on an employee’s skill level, education, and experience.
  • Stay up to date on current salary rates. Learn how to set salaries. Research average wages of positions held at your business and compare them to wages that other companies are paying. Keep your business’s location and size in mind.

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