It was little commented upon as it worked its way through the legislature, being just one of thousands of laws proposed each year, but make no mistake about it—Senate Bill 358, The Fair Pay Act, is an important new law for California employees and employers. Prompted by the continuing wage gap between men and women, SB 358 is designed to improve a California law that has existed since 1949. Prior to the enactment of SB 358, employees claiming that they received unequal pay based on their gender had to demonstrate that they weren’t paid at the same rate as someone of the opposite sex at the same establishment for equal work. The Fair Pay Act eliminates the reference to the same establishment, so that the business enterprise as a whole will be examined, and changes the standard from equal work to substantially similar work, taking into account skill, effort and responsibility, performed under similar working conditions. If an employee can show that he or she is paid less than someone of the opposite sex doing substantially similar work, then the employer has the burden to demonstrate that the wage difference is based on a seniority system, a merit system, a system that measures earnings by quality or quantity of production, or a bona fide factor other than sex, such as education, training or experience. A bona-fide factor other than sex can only be applied if the employer demonstrates that the factor is not based on or derived from a sex-based differential in compensation, is related to the position in question, and is consistent with business necessity. “Business necessity” is defined as an overriding legitimate business purpose such that the factor relied upon effectively fulfills the business purpose it is supposed to serve. An alternative business practice that would serve the same purpose without producing the wage differential would render the defense inapplicable.

SB 358 also prohibits an employer from discriminating or retaliating against employees for discussing or disclosing their own wages, discussing the wages of others, or inquiring about the wages of others. Employees are permitted to file claims in court or with the Division of Labor Standards Enforcement to recover unpaid wages, an equal amount as liquidated damages, interest and attorneys’ fees and costs. Additional relief can include reinstatement and any appropriate equitable relief.

The Fair Pay Act becomes effective on January 1, 2016.