Latest California Equal Pay Legislation Targets Race and Ethnicity

As California employers adjust to recent amendments to the state’s Equal Pay Act, additional changes are looming.  As we reported here, last year, California adopted the Fair Pay Act, which provides new pay equity provisions related to employees of the opposite sex.  Those amendments took effect on January 1, 2016.  Now, California lawmakers are setting their sights on pay disparities based on race and ethnicity.  On February 16, 2016, California Senator Isadore Hall III (D-South Bay) introduced Senate Bill 1063, known as the Wage Equality Act of 2016 (“SB 1063”), which seeks to expand pay equity requirements beyond sex to include race and ethnicity.

Proponents of SB 1063 claim that a pay gap exists not just between men and women, but also based on race and ethnicity.  For this reason, Senator Hall contends that SB 1063 is the “next logical step” in pay equity.  The bill’s supporters point to a 2013 study by the American Association of University Women, which claims that “African American and Hispanic women tend to be paid less than their white peers even when they have the same educational background.”

If enacted, SB 1063 would extend the Fair Pay Act’s requirements, nearly verbatim, to race and ethnicity.  Accordingly, SB 1063 would prohibit employers from paying any of their employees at wage rates that are less than the rates paid to employees of another race or ethnicity for substantially similar work unless the employer can establish an affirmative defense.  Similar to the Fair Pay Act, SB 1063 would require employers to demonstrate that a reasonably-applied factor accounts for an entire pay differential between employees of different races or ethnicities.  It would further require employers to demonstrate that the factor is: (1) not derived from a race or ethnicity-based differential in compensation; (2) job-related to the position at issue; and (3) consistent with a business necessity.

While the California Chamber of Commerce ultimately supported the Fair Pay Act last year, it remains to be seen whether it will go a step further and support SB 1063.  Given that the California Legislature overwhelmingly approved the Fair Pay Act and that SB 1063 consists of nearly verbatim language, it is likely that SB 1063 will pass as well.  However, it is too early to tell whether Governor Jerry Brown would sign the bill into law.

Pay equity efforts with respect to race and ethnicity are not limited to California.  Similar legislation is pending in New York, and the Equal Opportunity Employment Commission (“EEOC”) recently proposed certain reporting requirements designed to uncover pay discrimination (discussed here).

With SB 1063 and other similar legislation looming, employers should consider reviewing their pay practices and addressing any existing pay disparities among employees of different races or ethnicities.