Emtrain Blog

California Fair Pay Act: Q&A with Phyllis Cheng

Posted by Sam Keshavarz

November 24, 2015

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During our recent webinar, we gave attendees the opportunity to ask employment law expert Phyllis Cheng about how to prepare their organizations for the California Fair Pay Act.

Here are the top attendee questions with answers from Phyllis Cheng, DLA Piper partner and former Director of the Department of Fair Employment and Housing.


Questions HR professionals are asking about the California Fair Pay Act (SB 358):

Disclaimer: Phyllis' answers are intended as general guidance only and should not be relied upon as specific legal advice.

  

1. Does this law apply to management positions? All positions at all levels? Executive, too?

Yes. The new law will apply to all positions — management and executive too.


2. I know employees can share their compensation details with each other, but can employees ask HR about other employees comp?

Yes, the Fair Pay Act would bar an employer from prohibiting an employee from disclosing the employee’s own wages, discussing the wages of others, inquiring about another employee’s wages, or aiding or encouraging any other employee to exercise his or her rights.

To comply with both the Fair Pay Act and the privacy concerns of some employees, it would be good practice to make salary ranges for all job titles available at the human resources office in the form of a notebook or on the company’s intranet.


3. For companies over 500, did you say examine jobs with over 55% in one gender, or 50%?

The Fair Pay Act does not define the precise definition of a sex-segregated occupation. In general, pay equity research has defined occupations as those that are at least 60 to 70 percent dominated by one gender or another.

In Canada, where pay equity has been the law for over a decade, sex-segregated occupations range from 55 to 70 percent depending on the size of the employer.


4. How do I perform a compensation audit?

The National Committee on Pay Equity recommends the following questions on self-audit of compensation system for internal equity:

  1. Do you have a method to determine salaries and benefits?

  2. Do you write position descriptions, seek employee input and develop consensus for position descriptions? In unionized workplaces, do you involve union leaders?

  3. Do you have a consistent job evaluation system? Are jobs scored or assigned grades? Are positions where women and minorities work scored or graded according to the same standards as jobs where men or non-minorities work?

  4. Could a method be used for ensuring consistent pay for people with substantially similar levels or experience and education who hold jobs calling for substantially similar degrees of skill, effort, responsibility and working conditions, even though job titles may be different?

Ideally, employers would be best protected by using the professional assistance of an experienced compensation expert.


5. How do you handle a case where there is only one person in each job in question (e.g. department managers)?

All job compensation must be based on skill, effort, responsibility and working conditions, and bona fide factors other than sex. If a job classification has only one employee, it would be 100 percent segregated by sex. Single-employee job classifications would still be evaluated. However, it would be more difficult to infer pay discrimination among very small populations.


6. Does this mean that prior salary cannot be used?

If prior salary is based on internal job evaluation factors such as skill, effort, responsibility and working conditions, and other bona fide factors, it can be part of the consideration. However, relying solely on market rates would be insufficient, because the market is viewed as perpetuating historic sex discrimination that undervalues female-dominated jobs.


7. If we don’t use outside resources for pay, where can we get our information? Would surveys work and internal equity analysis?

If an employer does not retain the assistance of a third party compensation expert, it can conduct an internal audit by following the steps recommended by the National Committee on Pay Equity. The compensation system must be internally consistent based on the statutory elements of skill, effort, responsibility and working conditions, and other bona fide factors other than sex.


8. Could salaries be different between LA and SF? The example of Sacramento and a suburb of Sacramento is understandable. But there are cost of labor differences between LA and SF.


Yes. Cost-of-living differences between different geographical regions (i.e., San Francisco and Los Angeles) are permissible for setting wages, but not between neighboring areas within the same geographical regions (i.e., San Francisco and Oakland).


9. Can you speak to this as a multi-state employer, when we have only 1 employee in California?

Since there is no jurisdictional limit for the size of the employer for the Fair Pay Act, even if a single employee is in California, the compensation would need to be based on the statutory factors of skill, effort, responsibility and working conditions, and bona fide factors other than sex.


10. If we don't have established wage ranges, do we need to implement them?

An employer must demonstrate that job compensation is based on skill, effort, responsibility and working conditions, and other bona fide factors other than sex. Whether or not there are ranges within a job classification is optional. What’s important is establishing a compensation that is internally consistent and free of discrimination.


11. I heard an exception being made for "different locations," but I understand the new act actually does not allow for an exception with respect to different locations. Now, employees may be compared even if they do not work at the same establishment. Is the point with respect to the same city or substantially the same city, but that does not apply across the nation?

The Fair Pay Act eliminates the requirement that wage setting based on skill, effort, responsibility and working conditions be measured within the same establishment.

According to the author, same establishment means the same or neighboring local worksite. However, regional differences because of cost-of-living factors are permitted.

For example, worksites in Los Angeles and neighboring Santa Monica would be considered the same establishment, where differences in compensation should not be different.

However, worksites in Los Angeles and Fresno would not be considered the same establishment, where regional differences in compensation may be permitted.

 

 Do you have a question about the California Fair Pay Act?
Click the image below to submit your question.
Ask our workplace expert, Phyllis Cheng!

 

Topics: HR Compliance, Business Compliance