New Laws Expand California’s Equal Pay Act to Include Race and Limit Use of Prior Salary
New Laws Expand California’s Equal Pay Act to Include Race and Limit Use of Prior Salary

The Wage Equality Act of 2016 (Senate Bill 1063) expands California’s Equal Pay Act to target race and ethnicity-related wage differentials. This bill picks up where last year’s Equal Pay Act (which bolstered prohibitions on gender-based pay differentials) left off by adding a new Labor Code provision precluding wage differentials based on race or ethnicity.  Under the Wage Equality Act, employers will be required to demonstrate that a reasonably-applied factor accounts for any pay differential between employees of different races or ethnicities for doing substantially similar work as employees of another race or ethnicity and 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.  In addition, pay differences can be based on merit, seniority or quantity or quality of production systems.

The Wage Equality Act is connected with Assembly Bill 1676 as both bills had to be passed to become effective.  As originally drafted, AB 1676 would have prohibited hiring-related inquiries about salary history and required private employers to provide an applicant with the pay scale for a position upon request.  Since Governor Brown vetoed a similar bill last year, AB 1676 was revised and, as signed by the Governor, simply provides that prior salary cannot by itself justify a disparity in compensation.

The Wage Equality Act of 2016 and AB 1676 become effective on January 1, 2017.

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