California Enacts Nation's Toughest Equal Pay Law

September 18, 2015

California continues to lead the nation in new workplace regulations, recently enacting its own variation of the Paycheck Fairness Act, as the state legislature also moves to prohibit employers from asking job applicants for their salary history.  California's Fair Pay Act (SB 358), which will become effective January 1, 2016 once Governor Brown signs the law, will expand pay equity litigation by replacing the current "equal" and "same" job, skill, effort, and responsibility standard with a new one that only requires a showing of "substantially similar work, when viewed as a composite of skill, effort, and responsibility, and performed under similar working conditions."  These changes would significantly lower the bar for an equal pay suit by enabling plaintiffs to compare themselves with other employees working at any location for the same employer, and in any similar, but not necessarily the same, job.  The California legislature has also sent to the Governor's desk two laws (AB 1017 and AB 465) that would:

  • Prohibit an employer from seeking salary history, including benefits, from job applicants; and
  • Prohibit employers from requiring individuals, as a condition of employment, to agree to the waiver of any legal right, penalty, forum, or procedure for any employment law violations, thus barring certain arbitration agreements.
Another bill (AB 1354) that has recently passed the state legislature would effectively codify OFCCP's proposed Equal Pay Report rule for employers who have contracts with the state.  As has occurred with other measures, the new California laws are likely to prompt similar enactments in other states, though the ban on mandatory arbitration agreements will likely be challenged in federal court as being preempted by the Federal Arbitration Act.