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Tuesday, Jun 6, 2023

Salary-Equity Act May Equal Grief

Like many business executives, Jose Villa thinks that the pay gap between men and women should end. But the principal at downtown L.A. ad agency Sensis is uneasy about the bill Gov. Jerry Brown signed last week designed to do just that.

The law, described as the toughest pay-equity law in the nation, changes the current standard of “equal pay for equal work” to “equal pay for substantially similar work” and bars employers from retaliating against workers who discuss wages and salaries with colleagues.

It passed the Legislature last month with support from the California Chamber of Commerce and virtually no organized opposition.

But Villa isn’t exactly on board with the new law. He said it puts the onus on businesses to override longstanding attitudes and cultural differences, and he fears that if business owners don’t get it just right, they will find themselves the targets of a whole new class of discrimination lawsuits.

“A lot of the wage differential that exists between men and women is attributable to different attitudes, behavior and approaches to compensation between men and women,” Villa said, referring to several studies that have shown men to be more assertive in negotiating higher salaries and more frequent raises. “This law serves as a stick that punishes employers for dynamics that are often driven by employees themselves.”

What’s more, he was one of several voices last week that warned the new law, known as the California Fair Pay Act, would be a bonanza for plaintiff attorneys searching for more cases to bring against employers. California already has a reputation as the state with the most lawsuits filed against employers.

“I am very concerned that this new law will increase lawsuits – many frivolous – claiming sexual discrimination in the workplace,” he said.

‘Substantially similar’

The likely key driver for new lawsuits is the expansive language in the law: “equal pay for substantially similar work.”

In its support for the law, SB 358 by Sen. Hanna-Beth Jackson, D-Santa Barbara, the California chamber said this expanded definition is essential.

“The term ‘equal’ has proven too rigid and in limited cases, created absurd results that have provided a false sense of security for employers to justify a wage differential,” chamber lobbyist Jennifer Barrera wrote in a blog entry last week. “Some employers have actually interpreted the term ‘equal’ to mean absolutely identical job duties and title, and pay men a higher wage than women on minor variations. This was never the intent of the law and certainly is not how the federal counterpart, Equal Pay Act, or similar anti-discrimination laws have been interpreted with regard to wage discrimination.”

But one local employment attorney said this language is a potential legal minefield for employers.

“Plaintiff attorneys will seek to push the boundaries of ‘substantially similar work,’ said Michelle Lee Flores, labor and employment attorney at the downtown L.A. law office of Cozen O’Connor.

Flores said those attorneys will try to push on several fronts. One of those will likely be the degree of similarity between differently labeled jobs at the same employer, such as whether it is fair to compare the wage for a female hotel room cleaner with a male banquet hall janitor at the same hotel.

Then there are geographic differences. For example, should a female file clerk at a company office in Fresno earn the same hourly wage as a male file clerk at the same company’s downtown L.A. office, even though the cost of living might be double in Los Angeles?

“Since the law applies employer by employer, a key question will be how to account for location cost differentials,” Flores said. “This is not spelled out in the law and will likely have to be litigated.”

Tracking raises

Flores said a key step employers will have to take is to closely monitor worker raises. If the raises are merit based, for example, the criteria being used must be spelled out in detail so as to ensure there is no gender bias. The frequency of raises must also be tracked.

“Research shows that male workers will ask for periodic increases and women won’t,” she said. “So employers have to make sure that the compensation is similar. Steps like taking the names away from people and giving them generic numbers and looking at what they are earning.”

The law’s ban on retaliation against employees who inquire about co-worker salaries may help women ask for raises more frequently and therefore keep them more in line with the salaries of their male counterparts.

“If you don’t know what your co-workers are earning, then you don’t know whether you should be asking for a raise in the first place,” Flores said.

But it could also open the door to more lawsuits, especially at larger companies.

“Plaintiff lawyers will target big companies with a lot of people in the same position, performing substantially similar work; they will file class actions,” she said.

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Howard Fine
Howard Fine
Howard Fine is a 23-year veteran of the Los Angeles Business Journal. He covers stories pertaining to healthcare, biomedicine, energy, engineering, construction, and infrastructure. He has won several awards, including Best Body of Work for a single reporter from the Alliance of Area Business Publishers and Distinguished Journalist of the Year from the Society of Professional Journalists.

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