Tech Giants Continue To Face The Equal Pay Litigation Spotlight

In recent years, the volume of equal pay lawsuits has continued to increase in Silicon Valley, despite technology companies reaffirming their commitment to equal pay policies and practices. Earlier this month, Hewlett Packard Enterprise Co. (“HP”) was hit with the latest equal pay lawsuit. The class action lawsuit, filed in Santa Clara Superior Court, alleges that HP discriminated against its female workers by paying them less than their male counterparts and funneling women into certain jobs based on stereotypes.

The lawsuit is brought by two plaintiffs on behalf of a putative class comprised of all women employed by HP in California from November 8, 2014 to present, who worked in the following job categories: (1) Engineering, Information Technology and Design; (2) Administration, Finance and Legal; (3) Operations; (4) Public Relations, Marketing and Sales, and (5) Human Resources and Development. The suit alleges that HP pays its female employees “systematically lower compensation (including salary, stock and bonuses)” than male employees performing substantially similar work. Further, the plaintiffs allege that HP considers employees’ prior salary when determining compensation, which perpetuates the pay disparity because women have historically been paid less than men, and that women are channeled into lower-paying job positions than men because of stereotypes about what men and women can or should do. The plaintiffs allege four causes of action: (1) Violation of the California Equal Pay Act; (2) Failure to pay all wages due to discharged and quitting employees; (3) Violation of the Unfair Competition Law and (4) Declaratory relief.

The California Equal Pay Act prohibits gender pay disparities for equal work: when the work, working conditions, and qualifications are “substantially similar.” Cal. Lab. Code § 1197.5(a). In January 2016, California amended its existing equal pay law through the California Fair Pay Act (“FPA”). Notably, the FPA expanded California’s Equal Pay Act comparator standard from equal work to “substantially similar work, when viewed as a composite of skill, effort, and responsibility, and performed under similar working conditions.” Further, the FPA also significantly increased an employer’s burden to justify any pay disparities between or among employees who perform substantially similar work. Under the prior law, an employer could justify pay disparities by demonstrating the payment was made pursuant to a seniority system, a merit system, a system which measures earnings by quantity or quality of production, or a differential based on any bona fide factor other than sex. The new law, which still evaluates these factors to justify a pay disparity, requires that the reliance on the factor(s) be applied “reasonably” and must justify the entire wage disparity. It also requires that to justify a pay disparity based on any “bona fide factor other than sex” the employer must demonstrate that the factor is not based on or derived from a sex-based differential in compensation, is job related with respect to the position in question, and is consistent with a business necessity.

The plaintiffs here allege that HP has no such justification for its pay disparities, and that HP unlawfully paid women less than men for “equal” and/or “substantially similar” work. The plaintiffs allege HP did so willfully by maintaining a centralized, uniform policy throughout California of failing to adjust employees’ wage rates to conform with the law.

HP is far from the first tech giant to face equal pay litigation in recent years, and assuredly will not be the last. As is par for the course in California, as legislation increases, so does litigation, and we anticipate pay equity litigation will continue to increase in the tech industry, particularly as it evolves under the pressures to increase diversity in the workforce. In the wake of legislative reform, private litigants have focused on equal pay through a flood of discrimination lawsuits across the country, alleging claims under Title VII, the federal Equal Pay Act and/or state law analogs (particularly in California and New York).

Cases such as this one tend to be driven by the particular facts and circumstances surrounding each company’s pay practices. The technology sector will no doubt follow this case closely, and will seek to learn lessons from how other companies handle these suits – and to potentially modify their compensation practices to comply with the changing landscape of state pay equity laws (one such way to monitor policies and practices is through a privileged pay audit conducted by outside counsel). It remains clear that technology companies should seek advice now as to how to avoid being sued in a pay equity dispute and how to be in the best position to defend these claims if they are asserted.