By Lauren Weber
Starting Friday, California employers will face the nation's
strictest fair-pay law.
Under the state's Fair Pay Act, which aims to close the wage gap
between men and women, employers will have to be able to prove they
pay both genders equally for "substantially similar" work.
The rules have spurred employers to reassess the way they pay
and classify workers. Some are puzzling over what "similar" means
in legal terms, such as whether a marketing manager and a
supply-chain manager have roughly equivalent jobs. Others are
conducting complex audits of their payrolls, seeking to uncover any
disparities.
The law makes it easier for workers to challenge the fairness of
their pay and also nudges employers to fix pay issues before
complaints arise. Those who violate the law could be on the hook
for back wages and interest, plus an equal amount in additional
damages. According to data cited in the legislation, women in
California earn an average 84 cents for every dollar earned by
men.
A handful of California companies, some in Silicon Valley, have
been analyzing their pay practices for a while, driven not by the
law but by concerns about gender bias in the tech industry.
Since 2013, networking-equipment maker Cisco Systems Inc. has
had a unit that continuously reviews employee salaries to ensure
that men and women are being paid fairly. The initial gender gap in
salaries was "a very small percentage," and Cisco adjusted pay
accordingly, a company spokeswoman says, but she couldn't specify
how much it spent in the process.
Salesforce.com Inc. began looking into pay equity earlier this
year after two high-ranking women, including human-resources chief
Cindy Robbins, suggested to Chief Executive Marc Benioff that the
online software vendor examine its practices.
An initial assessment "didn't find a lot of disparity," Ms.
Robbins said in an interview this fall. But the company spent $3
million this year raising the salaries of some women and a few men
to reach pay parity.
Assessing pay is difficult, according to statisticians who
specialize in pay audits, since most HR systems don't capture all
the information needed to group similar jobs. In addition, they
typically lack enough data on individual workers to understand
whether legitimate factors--such as seniority, experience, or
education--account for differences in pay.
"It takes time to document these differences and confirm there
are bona fide factors other than sex driving any kind of pay gap,"
said Elaine Reardon, a director at Beverly Hills-based Resolution
Economics, which helps companies conduct pay audits. She estimated
the process can take three to six months.
Such audits may encourage employers to standardize the way they
set pay, instead of deciding it, as many companies do, on a
case-by-case basis, said Caroline Simard, leader of the diversity
and workplace transformation practice at Exponential Talent LLC, a
Bay Area consulting firm. "Standardization can be really good for
more equality," said Ms. Simard.
The firm helped Gap Inc. analyze its pay data this year to
verify what an internal audit found in 2014, that the retailer pays
men and women commensurately.
Gov. Jerry Brown signed the Fair Pay Act into law in October,
expanding a 1963 federal regulation prohibiting companies from
paying men and women differently for equal work. The "similar work"
provision is important, legal experts say, because the "equal work"
rule was very narrow, allowing employers to use any differences in
job responsibilities as a rationale for pay disparities.
"Most differences in pay scales between men and women aren't
because they're in the same job, but because they're in female- or
male-dominated job categories," said Martha West, professor of law
emerita at the University of California, Davis, School of Law.
Still, the law leaves open the question of which jobs can be
considered similar. Is a women's soccer coach similar to a men's
soccer coach? An assistant manager of HR, and one in
accounting?
"It will take several court decisions or agency decisions to
work out how broadly the term 'similar' will be defined," said Ms.
West.
The law shifts the burden of proof onto employers, rather than
individual workers, so companies will have to prove that they pay
equitably if an employee brings a complaint. The California Labor
Commissioner's Office, also known as the Division of Labor
Standards Enforcement, will oversee compliance.
The law applies to all workers in California, regardless of
their employer's size or where it is based, said Gary Gansle, a
partner in the Palo Alto office of law firm Squire Patton Boggs
LLP.
Managers of small businesses and companies with just a handful
of workers in the state say the law is prompting discussion and
some action. "We haven't planned on an audit yet, but it's probably
something we'd want to plan in the very near future," said Jason
Leverant, president of AtWork Group, a national staffing agency
based in Knoxville, Tenn., with nine branches and about 30
corporate employees in California.
The firm's outside counsel in California recently gave an
employment-law update for AtWork's local department heads and
divisional leaders, and pay legislation was covered. "We want to
make sure our people are aware of this. It can get pricey if you
don't comply," Mr. Leverant.
The new law bars employers from punishing workers who discuss
salaries with colleagues. That's a potentially significant
restriction, since it could spur more workers to talk about and
challenge pay disparities internally before pursuing complaints or
litigation, said Ms. West, the law professor.
Women need to "talk to each other and talk to their male
colleagues," she said. "And if women start organizing at work, that
will put pressure on employers to correct differences before anyone
has to sue."
Georgia Wells contributed to this article.
(END) Dow Jones Newswires
December 29, 2015 18:09 ET (23:09 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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