California: Equal Pay Obligations Expanded to Cover Race and Ethnicity


All Employers with California Employees


January 1, 2017


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California employers struggled this year to fully wrap their arms around the Fair Pay Act, which requires businesses to pay the same wage to employees of different genders who perform substantially similar work. Governor Brown has now signed the Wage and Equality Act of 2016 (the “Act”) into law, which adds workers of differing race or ethnicity as having the same protections similarly present under the Fair Pay Act.

Specifically, the Act amends Labor Code Section 1197.5, adding a provision that prohibits businesses from paying employees of one race/ethnicity a different wage than employees of another race/ethnicity when they perform substantially similar work under similar working conditions.  Similar to the Fair Pay Act, a wage differential can be justified under certain conditions, such as if the wage differential is based on a reasonably applied:  (1) seniority system; (2) merit system; (3) system that measures earnings by quantity or quality of production; or (4) bona fide factor other than race or ethnicity subject to certain restrictions.

Enforcement and penalties associated with the race/ethnicity provision implemented by the Act is again similar to the Fair Pay Act.  An aggrieved employee will be entitled to the amount of the wage differential plus interest and liquidated damages.

Affected employers should immediately prepare to conduct another round of compensation audits, this time broadening your comparison of compensation levels to determine if any disparities exist between race and ethnicity, in addition to gender.

Action Items

  1. ManagEase can help! Contact Anabel Tarzian, Director of Client Services, at (888) 230-3231 or to engage ManagEase’s services for compensation audits, compensation structuring, or compensation market surveys.
  2. Review the full text of SB 1063 here.
  3. Arrange for training of staff members who make compensation-related decisions.
  4. Arrange for an audit of employee job descriptions and compensation rates to confirm that they are in compliance with the new regulations.

Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser.

© 2016 ManagEase, Incorporated.

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