<Presentation Title/Client Name>
Amendments to the California
and New York Equal Pay Laws
Michele L. Maryott
Rachel S. Brass
Gabrielle Levin
Gibson, Dunn & Crutcher LLP
December 17, 2015
<Presentation Title/Client Name>
Overview
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Equal Pay Laws and Amendments Overview
Litigation and Other Risks
– Changes in Employer Obligations
– Causes of Action
– Effective Dates and Retroactivity
– Mass Action Risks
– Penalties
Key Takeaways for Employers
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EQUAL PAY: OVERVIEW OF
FEDERAL AND STATE LAWS
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More Than Fifty Years After the Equal Pay Act, A Pay
Gap Persists
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And the Gap Increases With Education Level
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And Varies by
Occupation
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Equal Pay Act, 29 U.S.C. § 206(d): Federal Law
• Creates cause of action for employees who receive less pay than employees
of the opposite sex who work at the same establishment and perform equal
work (work that requires equal skill, effort, and responsibility).
• Burden shifting:
o Employees must show disparity in pay between sexes for equal work.
o Employer must then provide evidence of non-sex factor that motivated
pay decision. If employer does not, employee wins.
o If employer provides such evidence, employee must counter with
evidence showing non-sex factor articulated by employer is pretext for
discrimination.
• Not amenable to Rule 23 class action treatment; may be brought as
collective, opt-in actions.
• Remedies: Backpay, injunctive relief, potential liquidated damages, and
attorneys’ fees and costs.
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California Equal Pay Law, Cal. Lab. Code § 1197.5:
Before Amendment
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An employee must demonstrate that they are paid less for “equal work” at
the “same establishment” except where:
– the payment is 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.
Includes a private right of action to recover the differential with a two year
statute of limitations, three years for willful violations.
Records regarding “wages and wage rates, job classifications, and other
terms and conditions of employment” must be retained for two years.
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<Presentation Title/Client Name>
New York Equal Pay Law, N.Y. Lab. Law § 194: Before
Amendment
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An employee must demonstrate that they are paid less for “equal work” at the
“same establishment” except where the payment is made pursuant to:
‾ a seniority system;
‾ a merit system;
‾ a system which measures earnings by quantity or quality of production; or
‾ any other factor other than sex.
Includes a private right of action to recover the differential with a six year
statute of limitations.
Employers shall “establish, maintain and preserve” all “payroll records
showing for each week worked the hours worked; the rate or rates of pay and
basis thereof, whether paid by the hour, shift, day, week, salary, piece,
commission, or other; gross wages; deductions; allowances, if any, claimed as
part of the minimum wage; and net wages for each employee” for not less
than “six years contemporaneous.” N.Y. Lab. Law § 195(4).
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Impetus for Amendments
“In 2013, the average woman in California working full-time, year-round earned a
median of 84 cents to every dollar earned by a man.”
“SB 358 will strengthen the state’s existing equal pay law by eliminating loopholes that
prevent effective enforcement and empower employees to discuss pay without fear of
retaliation.”
- California Senate Judiciary Committee, 4/27/2015
“The pay gap is not a myth.”
- New York State Assemblywoman Michele Titus, 4/28/2015
“[W]omen in New York are paid 84 cents for every dollar paid to men, amounting to a
yearly gap of $8,275 between men and women who work full time in the state.”
- National Partnership for Women & Families, 4/2013
“Wage secrecy policies hurt women’s chances at getting fair and equal pay across the
country.”
- Sonia Ossorio, President of NOW New York, 4/27/2015
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Effective Dates and Retroactivity
• California Fair Pay Act
• Effective January 1, 2016. Not retroactive:
• Amendment is silent on retroactivity.
• “It is a widely recognized legal principle, specifically embodied in
section 3 of the Civil Code, that in the absence of a clear legislative
intent to the contrary statutory enactments apply
prospectively.” Evangelatos v. Superior Court, 44 Cal. 3d 1188,
1193-94 (1988).
• New York Achieve Pay Equity Bill
• Effective January 19, 2016. Not retroactive:
• Amendment is silent on retroactivity.
• “It is a fundamental canon of statutory construction that retroactive
operation is not favored by courts and statutes will not be given
such construction unless the language expressly or by necessary
implication requires it.” Majewski v. Broadalbin-Perth Cent. Sch.
Dist., 91 N.Y.2d 577, 584 (N.Y. 1998).
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LITIGATION AND OTHER
RISKS: CALIFORNIA
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California: Expanded Comparators
1.
Eliminates “same establishment” requirement.
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California: Expanded Comparators
2.
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Changes standard regarding nature of work:
“equal work on jobs the performance of which requires equal skill,
effort, and responsibility, and which are performed under similar
working conditions”
To:
“substantially similar work, when viewed as a composite of skill,
effort, and responsibility, and performed under similar working
conditions”
What is the difference between “equal work” and “substantially similar
work”?
What is the difference between “equal” and “composite”?
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California: Available Defenses
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Amendment codifies burden shifting to employer to prove that pay
differentials are legally permissible.
Wage differential must be based upon one or more of the following:
– A seniority system;
– A merit system;
– A system that measures earnings by quantity or quality of production;
– A bona fide factor other than sex, such as education, training, or
experience.
The last factor applies only when it is a “business necessity” and does not
apply where an “employee demonstrates that an alternative business
practice exists that would serve the same business purpose without
producing the wage differential.”
Employer needs to demonstrate factors were applied reasonably and
account for entire differential.
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California: Bans Prohibitions on Wage Disclosure
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Employers are not obligated to disclose wages.
Labor Code § 232 already has similar prohibitions. No employer may:
– (a) Require, as a condition of employment, that an employee refrain
from disclosing the amount of his or her wages.
– (b) Require an employee to sign a waiver or other document that
purports to deny the employee the right to disclose the amount of his or
her wages.
– (c) Discharge, formally discipline, or otherwise discriminate against an
employee who discloses the amount of his or her wages.
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California: New Retaliation Cause of Action
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Amendment adds civil cause of action for retaliation with one year statute
of limitations:
– “An employer shall not discharge, or in any manner discriminate or
retaliate against, any employee by reason of any action taken by the
employee to invoke or assist in any manner the enforcement of this
section.”
Note that employees may currently have a so-called “Tameny” claim:
– “[W]hen an employer’s discharge of an employee violates fundamental
principles of public policy, the discharged employee may maintain a
tort action and recover damages traditionally available in such actions.”
Tameny v. Atl. Richfield Co., 27 Cal.3d 167, 170 (1980).
– Three-year statute of limitations.
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California: Record-Keeping Requirements
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Obligation extended from 2 to 3 years.
Related statutes:
– Labor Code § 226 already requires wage information to be retained for
three years.
– Labor Code § 1198.5 requires retention of “personnel records that the
employer maintains relating to the employee’s performance or to any
grievance concerning the employee” for three years.
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California: Expanded Mass Action Risks
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•
New, vague and untested requirements will incentivize increased mass
action filings.
– “Substantially similar work” requirement.
– Additional requirements before employer can assert “bona fide factor
other than sex” defense.
– Employee has an increased ability to rebut defense.
But cases will still involve fact-specific inquiries.
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<Presentation Title/Client Name>
California Penalties
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Equal Pay Provision
– Wages denied to the employee by virtue of violation, plus interest.
– Liquidated damages.
– Costs.
– Attorneys’ fees.
Retaliation Provision
– Reinstatement.
– Reimbursement of lost wages and/or benefits caused by the retaliation.
– Interest.
– Other “appropriate equitable relief.”
Private Attorney General Act (“PAGA”) Penalties
– $100 for initial violation per employee per pay period and $200 per
employee per pay period for each subsequent violation when Labor Code
does not already provide for civil penalty.
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<Presentation Title/Client Name>
California Fair Employment and Housing Act (FEHA)
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Prohibits discrimination and harassment in employment because of sex and
other protected classifications.
– Also prohibits retaliation for protesting illegal discrimination on the basis
of sex.
How is it different from the California Fair Pay Act?
– Enforced by the Department of Fair Employment and Housing (DFEH).
– Exhaustion of administrative remedies required.
– Employer must have at least five employees to be covered by FEHA.
– Punitive damages are available for FEHA claims.
– PAGA claims are not available for FEHA claims.
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<Presentation Title/Client Name>
California Fair Pay Act: Amendment Overview
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Eliminates the “same establishment” requirement.
Replaces “equal work” with “substantially similar work, when viewed as a
composite of skill, effort, and responsibility, and performed under similar
working conditions.”
Adds a burden for employer to demonstrate that a wage differential is based
on a seniority system, a merit system, a system that measures earnings by
quantity or quality of production, or a bona fide factor other than sex, such
as education, training, or experience.
Adds a private right of action for retaliation.
Prohibits employers from prohibiting disclosure of wages.
Expands record-keeping requirements to three years.
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LITIGATION AND OTHER
RISKS: NEW YORK
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New York: Expanded Comparators
•
Defines and expands “same establishment”:
‾ “[E]mployees shall be deemed to work in the same establishment if the
employees work for the same employer at workplaces located in the
same geographic region, no larger than a county, taking into account
population distribution, economic activity, and/or the presence of
municipalities.”
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<Presentation Title/Client Name>
New York: Available Defenses
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Wage differential must be based upon one or more of the following:
‾ A seniority system;
‾ A merit system;
‾ A system that measures earnings by quantity or quality of production; or
‾ A bona fide factor other than sex, such as education, training or
experience.
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<Presentation Title/Client Name>
New York: Available Defenses
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The last factor shall not be based on “sex-based differentials in
compensation” and shall be “job-related” and consistent with “business
necessity.”
– “Business necessity” is “a factor that bears a manifest relationship to the
employment in question.”
The last factor shall not apply if an employee can demonstrate “(A) that an
employer uses a particular employment practice that causes a disparate
impact on the basis of sex, (B) that an alternative employment practice exists
that would serve the same business purpose and not produce such
differential, and (C) that the employer has refused to adopt such alternative
practice.”
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<Presentation Title/Client Name>
New York: Bans Prohibitions on Wage Disclosure
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Employers may not prohibit “an employee from inquiring about,
discussing, or disclosing wages of such employee or another employee.”
An employer may in a “written policy provided to all employees, establish
reasonable workplace and workday limitations on the time, place and
manner for inquiries about, discussion or, or disclosure of wages.”
– These limitations should be consistent with standards promulgated by
the commissioner and consistent with other state and federal laws.
– The policy may prohibit “an employee from discussing or disclosing
the wages of another employee without such employee’s prior
permission.”
– Nothing shall require an employee to disclose his or her wages.
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<Presentation Title/Client Name>
New York: Mass Action Risks
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•
New requirements will unlikely have any affect on litigation.
– While the new requirements are supposed to make it easier for
plaintiffs to prevail, it will probably not significantly increase mass
action litigation.
– The language of the statute, “a bona fide factor other than sex, such as
education, training, or experience,” continues to make the inquiry fact
specific.
However, employees do have increased ability to rebut the employer's
defense.
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<Presentation Title/Client Name>
New York Penalties
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Full amount of underpayment;
All reasonable attorneys’ fees;
Pre-judgment interest as required under the civil practice law and rules; and
Unless the employer provides a good faith basis to believe its
underpayment of wages was in compliance with the law, an additional
amount of liquidated damages equal to
– 100 percent of total amount of the wages found to be due, or
– up to 300 percent of the wages found to be due for a willful violation of
Section 194.
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<Presentation Title/Client Name>
New York Achieve Pay Equity Bill: Amendment
Overview
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Defines “same establishment.”
Eliminates defense based on “any factor other than sex,” and replaces it
with a defense based on “a bona fide factor other than sex, such as
education, training or experience.”
Permits disparate impact claims even if pay differentials are based on a
“bona fide factor other than sex.”
Prohibits employers from prohibiting disclosure of wages.
Increases liquidated damages for willful violations to 300% of unpaid
wages.
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<Presentation Title/Client Name>
California
New York
Federal Equal Pay Act
Eliminates “same establishment” requirement
Expands definition of “same establishment”
“Same establishment” requirement
“equal work”  “substantially similar work”
No change
“equal work” (work that requires “equal
skill, effort, and responsibility”)
Narrows “bona fide factor other than sex”
defense (not based on sex-based differential,
job-related, business necessity)
Narrows “factor other than sex” defense
(factor must be “bona fide”; not based on
sex-based differential, job-related, business
necessity)
Employer defense = evidence that pay
differential is based on “any other factor
other than sex”
“Business necessity” = overriding legitimate
business purpose
“Business necessity” = bears a manifest
relationship to the employment in question
N/A
Defenses available only if employer
demonstrates factor is applied reasonably and
accounts for entire wage differential
No such requirement
No such requirement
Prohibition on disclosure of wages are not
allowed
Complete prohibition on disclosure of
wages are not allowed, but reasonable
limitations on discussions ok
No such prohibition
Adds private right of action for retaliation
N/A
N/A
2-year record-keeping requirement  3 years
N/A
FLSA requirements + 2 years for records
that explain wage differential based on sex
in same establishment (29 C.F.R. §
1620.32)
Employee can rebut employer defense if shows
alternative business practice exists
Employee can rebut employer defense if
shows alternative business practice, practice
causes disparate impact, and employer
refuses to adopt an alternative practice
Employee can rebut employer defense by
showing non-sex factor is pretext for
discrimination
No changes in damages
Liquidated damages increased to treble
damages
Backpay, injunctive relief, potential
liquidated damages, and attorneys’ fees
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and costs
<Presentation Title/Client Name>
What about other States?
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Most states have either an equal pay law or an employment discrimination
law that creates causes of action to sue for damages.
– Some have expanded to any protected class.
Most state laws cover employers of any size, and state laws exempting
small employers have low thresholds (e.g., 2-15 employees).
Alabama and Mississippi have no equal pay or anti-discrimination law.
– But, of course, EPA and Title VII apply nationwide.
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WHAT NOW?
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Analyze Policies and Procedures
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Review current compensation policies and procedures and employee
handbooks for compliance.
– Ensure that there are no prohibitions on discussing compensation.
– Train managers on these policies.
Review and update arbitration agreements to include equal pay claims.
In California, update document retention policies to ensure maintenance of
employee wages, wage rates, and job classifications for three years.
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<Presentation Title/Client Name>
Analyze Compensation for Differentials
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Audit current compensation and job descriptions to account for
differentials, preferably in privileged setting.
– Take “similarly situated” jobs into consideration—not just employees
with same job titles or job descriptions.
– Ensure wage differentials among “substantially similar” jobs can be
attributed to legitimate, non-gender-based considerations.
What do I do if I identify differences?
Train employees who make compensation decisions.
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<Presentation Title/Client Name>
Be Thoughtful About Documentation
•
In California, in addition to retaining specified information for three years,
consider what other documents (e.g., job descriptions) might help justify
pay decisions and maintain those.
•
In New York, employers may want to conduct a disparate impact analysis
to determine if employees within the same county are being paid equal
wages in order to be in compliance with the definition of “same
establishment.”
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<Presentation Title/Client Name>
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