Say It Again: No Common Question Binds a Class Subject to Thousands of Individualized Pay Decisions

Echoing an increasingly familiar refrain, another district court has declined to certify a class of women bringing pay equity claims on the basis that they did not present a common question capable of producing a common answer to “the crucial question why was I disfavored.” Relying largely upon Wal-Mart Stores, Inc. v. Dukes, the court found certification inappropriate because the putative class members were subject to countless independent decisions involving the judgment and discretion of individual managers. The case also serves as another reminder that courts (including California state courts) will not accept an overly simplistic analysis comparing broad job categories or titles, but will continue to look at actual business practices and job responsibilities to ensure comparators are “similarly situated” so a meaningful pay comparison can be made. READ MORE

All Aboard! California Law Requires More Female Representation on Boards of Directors

As part of its effort to close gender-based pay gaps, California will now require companies to increase female representation on boards of directors.

Currently, one in four publicly held corporations in California have no women on their boards of directors. SB 826, which Governor Jerry Brown signed into law at the end of September, requires that all publicly held corporations based in California have at least one woman director by December 31, 2019. That is not the end of the requirements; by December 31, 2021, companies with five authorized directors must have a minimum of two female board members, and companies with at least six directors must have a minimum of three females on the board. The California Secretary of State will publish the names of compliant and non-compliant companies on an annual basis. In addition to the “name and shame” provisions, non-compliant companies face fines of $100,000 for the first violation and $300,000 for subsequent violations. READ MORE

Oregon Announces Final Rules for Equal Pay Law Set to Take Effect January 1, 2019

As we reported last month, the Oregon Bureau of Labor and Industries (BOLI) issued proposed regulations interpreting the provisions of the new Oregon Equal Pay Act of 2017, which will become effective January 1, 2019.

On November 19, 2018, after receiving a number of comments on proposed rules BOLI filed final rules with the Secretary of State. Stakeholders that provided input on the potential impact of the rules as originally proposed ranged from large law firms and industry groups to small business owners and farmers, as well as multiple higher education institutions (including Oregon State University, Portland State University, the University of Oregon, and the Oregon Community College Association).

Some of the noteworthy changes between the proposed and final rules are that the final rules:

  • Added the language “regardless of job description or job title” in the definition of “work of comparable character,” thus emphasizing that job title or written job description alone cannot establish that any two employees are (or aren’t) “substantially similar.” OAR 839-008-0000(17).
  • Clarified in OAR 839-008-0005(2) what it means to “screen job applications based on current or past compensation.” In particular, the final rules narrow the scope of this language to make clear that the prohibition of “screen[ing]” in ORS 652.220(1)(c) bars only the consideration of current or past compensation to determine “a job applicant’s eligibility or suitability for employment.”  By contrast, the draft rules had proposed that prohibited “screen[ing]” would include any use “to group, sort, or select [employees] at any stage of the hiring process,” or to assess “[a] current employee’s eligibility for an internal transfer, move or hire to a new position with the same employer.”  This narrowing makes clear that the limits of the new prohibition on using prior pay to “screen.”
  • Added “creativity” and “precision” as examples of the type of “skill” considerations to be evaluated in determining whether any two employees do, in fact, perform “work of a comparable character.” OAR 839-008-0010(1)(b).
  • Eliminated language in proposed rule OAR 839-008-0010(2) that would have stated that “[m]inor differences in knowledge, skill, effort, responsibility, and working conditions will not prevent jobs from being comparable.” This change is consistent with comments submitted by a host of employers—including NFIB Oregon (a non-profit advocacy group for small businesses), the Oregon Farm Bureau, and Oregon Business & Industry—who expressed concern that the “minor differences” language could create confusion and be read to conflict with the statutory standard of “substantially similar.”
  • Revised OAR 839-008-0010(2) to make clear that “[e]valuations of work of comparable character need only consider comparisons of Oregon employees.”
  • Eliminated the proposed “Equal-Pay Analyses Surveys” rule.

A number of concerns expressed by commentators went unaddressed in the final rules, however.  Several commenters requested, but BOLI has not yet provided, a “pay calculation” tool akin to that provided by the Massachusetts Attorney General’s Office.  In addition, commentators noted that the new law includes as “protected classes” several groups on which employers may not routinely collect demographic information (e.g., sexual orientation or marital status), which make it impossible for employers to proactively monitor pay differentials across these groups which the law purports to prohibit.  And a number of others asked the rules to clarify the law regarding pay differentials that may exist between employees in collective bargaining units and those outside those units, yet the final rules do not speak to the issue.

By and large, though, Oregon employers should be heartened by these changes.  They eliminate some of the more problematic provisions of the rules as originally proposed and underscore the fact-specific analysis of work performed needed to determine whether employees in fact perform “work of comparable character” within the meaning of the new law.

Orrick will continue to monitor additional developments in interpreting and applying the new law as it takes effect, and to advise employers in Oregon on compliance strategies in light of the new law.

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. READ MORE

In Oregon, Employers Await Guidance as New Equal Pay Law’s January 1, 2019 Effective Date Looms

The Oregon Bureau of Labor and Industries (BOLI) has issued proposed regulations interpreting the provisions of the new Oregon Equal Pay Act of 2017, which will become effective January 1, 2019.  Although the prohibition against “seek[ing]” salary history from applicants already is in effect, many of the law’s most significant provisions go into effect on January 1.  READ MORE

Business Groups Urge U.S. Supreme Court to Review Ninth Circuit Decision Rejecting Use of Prior Salary to Set Pay

In the wake of the Ninth Circuit’s decision in Rizo v. Yovino, key employer-side groups have expressed support for U.S. Supreme Court review to determine whether employers who rely on prior salary to set starting pay can continue to do so consistent with the federal Equal Pay Act, 29 U.S.C. § 206(d)(1) (“EPA”).

The EPA prohibits sex-based wage differentials between men and women who perform equal work, but allows employers to justify wage differentials even between such employees based on seniority, merit, production, or “any other factor other than sex.” The Ninth Circuit’s recent en banc decision in Rizo held that “prior salary alone or in combination with other factors cannot justify a wage differential” because prior salary is not a “factor other than sex.”  887 F.3d 453, 456 (9th Cir. 2018). The Ninth Circuit reasoned that a “factor other than sex” must be “job-related,” and thus rejected the defendant employer’s exclusive reliance on prior salary as a benchmark against which to set starting pay for new hires. The Court, however, left open the possibility that prior salary could permissibly “play a role in the course of an individualized salary negotiation.” Id. at 461. (For a comprehensive analysis of the Rizo decision, see Can Prior Pay Inform a New Hire’s Salary? (Daily Journal, May 11, 2018)).

On August 30, 2018, the Fresno County Superintendent of Schools, Jim Yovino, filed a petition for writ of certiorari asking the Supreme Court to review the Ninth Circuit’s decision in Rizo. The petition argued that the U.S. Supreme Court should grant review because the Circuit Courts of Appeal diverge on whether prior salary is a “factor other than sex” (see, e.g., Wernsing v. Dep’t of Human Servs., State of Illinois, 427 F.3d 466, 469 (7th Cir. 2005)) and because prior salary is a “factor other than sex” under a plain reading of the EPA.

Since Yovino’s petition for writ of certiorari, several business groups have filed amici curiae briefs urging the U.S. Supreme Court to accept the case. The Chamber of Commerce of the United States of America (Chamber) and the Society for Human Resource Management (SHRM) recently filed a brief for amici curiae in support of Yovino. The Chamber is the world’s largest business federation, representing the interests of 300,000 members and over three million companies and professional organizations. SHRM is the world’s largest human resources professional society, representing 300,000 members in more than 165 countries. Representing strong business interests, the amici brief asserts that the question of whether employers can rely on prior salary history in setting workers’ wages “is of extraordinary significance.” The amici brief argues that the Rizo decision deepens a circuit split on the legality of the widely-used and useful employment practice of relying on prior salary, which is legal in most jurisdictions and is a facially sex-neutral practice. The Chamber and SHRM also argue that the Ninth Circuit’s “tortured reading of the EPA’s catchall defense” could be read to call into question other legitimate and sex-neutral practices that rely on objective information, such as individualized negotiations and competitive salary bidding.

The Center for Workplace Compliance (CWC) and the National Federation of Independent Business (NFIB) Small Business Legal Center also filed a brief for amici curiae in support of Yovino’s petition. The CWC, whose membership includes 240 major U.S. corporations, is the nation’s largest nonprofit association of employers dedicated exclusively to ensuring compliance with fair employment and other workplace requirements. The NFIB is the nation’s leading small business association, with offices across the country. The CWC and NFIB argue that the “Ninth Circuit’s decision [] rests on a legally flawed premise—that an employer has an affirmative obligation under the EPA to eliminate disparities in pay, even when those disparities are caused by gender-neutral compensation policies.” The amici brief asserts that review of the Rizo decision is necessary to “resolve issues of substantial importance to the employer community,” and that permitting the decision to stand “will have a profound, largely negative, impact on employers nationwide.”

The U.S. Supreme Court will likely issue a decision on the petition for writ of certiorari later this year. Until then, it remains unclear whether Rizo will remain the guiding precedent in the Ninth Circuit. For employers operating in California, Rizo may not prompt significant changes given that the California Equal Pay Act separately provides that “prior salary shall not, by itself, justify any disparity in compensation.” But employers elsewhere in the Ninth Circuit will need to evaluate their pay practices in light of Rizo unless and until it is overruled. Experienced counsel can assist employers in navigating these complex issues.

I Can See Clearly Now: The OFCCP’s Latest Directives Seek to Increase Transparency

For the second month in a row, the Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) has issued guidance to update materials available to federal contractors and subcontractors. On September 19, 2018, the OFCCP issued two broad directives aimed at improving transparency and communications and to implement the highly-anticipated ombud service. These directives respond to contractor complaints related to the length and process for OFCCP audits. READ MORE

Is it Safe to Wade into the “Safe Harbor” Waters in Recent Pay Laws?

A growing number of state and local governments have passed equal pay laws in recent years. These statutes and ordinances have varied in their specific content and have created a patchwork of legal requirements vexing employers who are attempting to comply. Two states have added wrinkles to this patchwork. While many of the obligations have favored employees, Massachusetts and Oregon have attempted to tip the scales to employers by creating “safe harbor” provisions aimed at providing some form of relief for employers who perform voluntary pay audits and correct any adverse findings through “safe harbor” provisions. These provisions, however, raise significant questions that employers must consider before concluding that they are fully protected. READ MORE

Cert Denied in Potential Harbinger for California Equal Pay Act Class Actions

On August 28, 2018, a judge in Los Angeles County Superior Court issued one of the first decisions – if not the first decision – on a motion to certify a putative class action under the state’s revised Equal Pay Act, Cal. Labor Code § 1197.5 (“EPA”).  See Bridewell-Sledge, et al. v. Blue Cross of California, No. BC477451 (Los Angeles Sup. Ct. Aug. 28, 2018) (Court’s Ruling and Order re: Pls.’ Mot. for Class Certification).  Specifically, the court denied the plaintiffs’ motion to certify classes of all female and all African American non-exempt employees of Anthem Blue Cross California and related entities.  The complaint alleged both violations of the EPA, as well as discrimination in promotions and pay in violation of the Fair Employment and Housing Act (Cal. Gov. Code §12900 et. seq.).[1]

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Hitting Home: Law Firms are Now the Target of a Spate of New Pay Equity Cases

Big Law is no stranger to providing advice on pay equity or defending pay equity lawsuits. But until recently, headlines generally featured lawsuits challenging the compensation practices of their clients, not the law firms that represented them.

In the last two years, however, Big Law has itself moved into the spotlight with a wave of pay equity suits brought by aggrieved female partners and, in some cases, female associates. To date, the number of these suits against Big Law—either pending or concluded with multi-million-dollar settlements—has reached double digits and shows no signs of slowing down. We think the details are worth a second look—particularly in light of the complicated dynamics at play in how law firm partner compensation is set. READ MORE