Employers Left Hanging Again: Coates v. Farmers Reaches Settlement & Still No Answers on Interpreting California’s Fair Pay Act

What many were hoping would bring clarity to California’s Fair Pay Act, further left employers in the dark on how to interpret the Act.

On April 29, 2015, Plaintiff Lynne Coates filed a class action lawsuit against Farmers alleging gender discrimination claims under Title VII and California’s Fair Employment and Housing Act, as well as violations of the federal and California equal pay acts and California’s Private Attorneys General Act.  Coates claimed that Farmers systematically discriminated against female attorney employees and that its “common compensation and promotion policies and practices resulted in lower pay and unequal promotions for female attorneys.”

Eight months after Coates filed her lawsuit, on January 1, 2016, the California Fair Pay Act (SB 358) went into effect and as expected, employers anxiously awaited guidance on how to interpret these new provisions.  That guidance could have come, but unfortunately did not, when California’s Division of Labor Standards Enforcement issued FAQs on the Fair Pay Act.  Unfortunately, those FAQs left several tough questions unanswered.[1]

One month after the Fair Pay Act went into effect, the plaintiff in Coates amended her lawsuit to add, among other things, a new claim under the Act.  As the first case to allege a violation of the new law, it appeared that Coates v. Farmers would finally provide answers on how to interpret it.

But on April 16, 2016, the plaintiff in Coates filed a Notice of Preliminary Approval of Class/Collective Action Settlement (which Defendants did not oppose).  The Coates settlement includes a fund of $4.1 million, including $15,000 to the California Labor Workforce Development Agency (a reminder to employers that claims under the Fair Pay Act are covered by PAGA).  Additionally, although the settlement left questions on how to interpret the California Fair Pay Act unanswered, it contains significant and detailed injunctive relief provisions.  Most notably, the parties agreed that Farmers will:

• retain an independent Human Resources Consultant to review its employment policies and procedures with respect to compensation, grade placement, performance ratings and promotions, and to modify those policies where appropriate;
• appoint an internal Compliance Official to monitor compliance, provide annual diversity training and to report to Class Counsel on an annual basis;
• refrain from prohibiting discussion about pay amongst attorney employees;
• conduct annual statistical analyses to confirm that its compensation policies and procedures are not resulting in a negative impact and to correct any adverse impact identified; and
• use its best efforts to increase the representation of women in the higher salary grades over the next three years to certain “agreed upon” benchmarks.

The full settlement can be found here. Although only time will tell, these provisions may be indicative of the types of relief provisions employers should expect to see from plaintiff’s counsel going forward when it comes to settlement of California Fair Pay Act claims.

[1] For more information on the DLSE’s FAQs, please see Orrick’s previous post, https://blogs.orrick.com/employment/2016/04/06/california-dlse-posts-faqs-on-new-fair-pay-law-but-leaves-tough-questions-unanswered/