California Fair Pay Act: A Letter of Clarification?

As discussed in this blog series, the California Fair Pay Act (CFPA) was recently signed into law and provides for bona fide factors other than sex to explain wage differentials.  Separate from the final law, it should be noted that a letter from Senator Jackson to the President of the California Senate was issued to clarify the intent for certain factors which may qualify as a bona fide factor, but were not included in the final law. This letter specifically addresses that geographic and shift differentials may qualify as a bona fide factor as long as the standard is met as specified in the bill.

A question that is outstanding from the CFPA, for which this letter does not clarify, is whether or not market could qualify as a bona fide factor. For example, a salary survey may show that a software engineer has a median salary of $75,000 while a computer programmer has a median salary of $65,000. Many employers would rely upon this market data when determining starting and current salaries.   As a reminder, job specific market data is not the same as a geographic differential.  One section of the CFPA in particular may have set the stage for removing market as an option for a bona fide factor:

Section I(c): California has prohibited gender-based wage discrimination since 1949. Section 1197.5 of the Labor Code was enacted to redress the segregation of women into historically undervalued occupations, but it has evolved over the last four decades so that it is now virtually identical to the federal Equal Pay Act of 1963 (29 U.S.C. Sec. 206(d)). However, the state provisions are rarely utilized because the current statutory language makes it difficult to establish a successful claim.

Only time will tell if companies are able to defend the business necessity of market data in setting pay. At the very least, there may be an uphill climb to do so. And if market does not meet the standard of a bona fide factor, will California employers be forced into well-defined pay scales or a collective bargaining style approach to compensation?

By Amanda Shapiro, Senior Consultant at DCI Consulting Group

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