February 26, 2016
by CLG Attorney Andrea Jones

On the heels of my last update regarding California’s newly modified Fair Pay Act, a few days ago the federal government announced its intent to gather additional pay information from larger employers (those with 100+ workers). This would require all businesses with 100+ workers to peel back the curtains on pay practices and provide detailed information about employee salaries. If the plan moves forward, employers will be subject to an increased pay transparency standard by the end of this calendar year. This does not just affect large employers. As articulated below, the initiative will indirectly impact claims based on unlawful pay gaps against smaller employers—especially in light of the Fair Pay Act.

The Proposal

The Obama Administration has proposed executive action through the Equal Employment Opportunity Commission (EEOC) to require certain businesses to provide information regarding how much each employee is earning. After the law goes into effect, employers must break down pay information by gender, race and ethnicity.

How Will Employers Report The Information?

Currently employers with 100+ workers already complete the EEO-1 form annually, providing demographic information about race, gender, and ethnicity. Once the new revisions take effect, the form will also require employers to include pay information.

Why Has The Government Proposed This Change?

The federal government’s goal is to identify businesses that might have pay gaps, and then target those employers who are discriminating based on gender.

When Will The Law Take Effect?

The EEOC Chair anticipates the rulemaking process to be completed by September 2016, when the new rules would officially go into effect. If this occurs, employers will have to submit their pay data for the first time in September 2017.

What Should Employers Do?

Companies with (or close to) 100 or more workers should review current pay systems and identify any areas of pay disparity. By conducting your own gender-based audit of pay practices, you will be able to determine and address whether any pay gaps exist. If such gaps do exist, you must be prepared to explain the gaps based on legitimate, non-discriminatory reasons.

What Does This Mean For California Employers?

California’s newly modified Fair Pay Act will almost certainly result in an increase of gender-based claims of unlawful pay differentials. Now that the federal government has reinforced the policies of the Fair Pay Act and provided an additional tool to litigate such claims, California employees will have even greater incentive to pursue their rights regarding pay gaps.  Additionally, California courts will  likely take note of this national trend toward addressing the gender-pay gap, which may result in judgments and rulings more favorable towards employees.

If there are any questions, please feel free to contact me at [email protected]

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