United States: California Passes Law Aimed To Bridge The Gender Wage Inequality Gap

Last Updated: October 7 2015
Article by Denise M. Visconti and Jennifer E. Savion

On October 6, 2015, California's Governor Edmund G. Brown, Jr. signed into law Senate Bill (SB) 358, legislation intended to increase wage transparency and which will make it more difficult for an employer to defend against an equal pay claim. This measure, which amends Section 1197.5 of the California Labor Code relating to private employment, will take effect on January 1, 2016.  When it takes effect, California's law on this subject will be one of the strongest equal pay laws in the nation.

The Intended Purpose of the Amendments

According to the report of the California Assembly Appropriations Committee, SB 358 was introduced to rectify California's "gender wage inequality" by discouraging secrecy among employees regarding their pay.  The bill's author asserted that in 2013 the average woman in California working full time earned a median of 84 cents to every dollar earned by a man, resulting in a loss of over $33 billion each year.  According to the author, SB 358 will allow open discussion and inquiries by employees regarding their own pay—as well as the pay of their co-workers—to enable employees to discover and challenge any wage differential and rectify this gap.

SB 358 also prohibits employers from discriminating or retaliating against employees who seek to enforce their rights under the amended statute.  Employees who can prove they were discharged, discriminated against, or retaliated against in violation of the amended statutory scheme are entitled to seek reinstatement, recover lost wages and benefits, and obtain equitable relief against their employer.1

Requirements Under the Amended Statute

SB 358 borrows significantly from the yet-to-be-passed federal Paycheck Fairness Act, a bill that has stalled in Congress the last several years.2  SB 358 substantially relaxes the evidentiary burden of proof on employees complaining of unequal pay based on their gender.  Before the amendment, an employee had to demonstrate he or she was not being paid at the same rate as someone of the opposite sex at the same establishment for "equal work."3  Under SB 358, the requirement of "same establishment" has been deleted, and the employee need only show he or she is not being paid at the same rate for "substantially similar work."4  Substantially similar work means a composite of skill, effort, and responsibility, performed under similar working conditions – but it need not be the same exact job.

Once the employee has made such a showing, SB 358 shifts the burden to an employer to affirmatively demonstrate the pay difference being complained about is based on any or all of these specific factors:

  1.  a seniority system,
  2.  a merit system,
  3.  a system that measures earnings by quality or quantity of production, or
  4.  a bona fide factor other than sex, such as education, training, or experience.5 

While these four factors were included in Section 1197.5 of the Labor Code prior to the amendment, with the passage of SB 358, the employer's ability to rely on the fourth factor as a defense has been weakened significantly.  In fact, SB 358 vastly increases the employer's burden in defending a claim of unfair pay by requiring an employer to show, through competent evidence, that any difference in compensation is not sex-based, is related to the position in question, and there exists a business necessity for the wage differential.6 The employee still may rebut this defense, however, by demonstrating an alternative business practice exists that would serve the same business purpose without the difference in wages.

Under the current statute as amended, an employer must meet a new and higher standard of demonstrating that any pay difference is tied to an absolute business necessity.  The employer also must demonstrate that its reliance on any or all of the above factors is reasonable,7 and that one or more of these factors accounts entirely for any wage differential;8 simply pointing to a factor as partial explanation no longer is sufficient.  As a result, the burden for employers in defending against an equal pay claim under SB 358 appears to be significantly greater than the burden under the federal Equal Pay Act of 1963.9

The damages to which an employee may be entitled remain the same under the existing law:  a successful employee may recover the amount of wages the employee was not paid due to the wage differential along with interest, plus an additional equal amount as liquidated damages.10 

SB 358 also expressly prohibits an employer from preventing its employees from disclosing their own wages, discussing the wages of others, inquiring as to other employees' wages, or assisting another employee in asserting his or her rights under Labor Code Section 1197.5.11  However, employers should note the law provides that no one, including the employer, is obliged to make any disclosures concerning employees' wages.12 

The law also prohibits employers from discriminating or retaliating against any employee for invoking the employee's own rights under this amended section, or assisting others to invoke their rights under the newly amended law.  An employee may, within one year of the accrual of a cause of action, bring a civil action for such discrimination or retaliation to recover lost wages and benefits, along with interest and appropriate equitable relief.13  There is no administrative exhaustion required before an employee files suit.

SB 358 also extends the time period for keeping records related to employees' terms and conditions of employment (including but not limited to employees' wages and job classifications) from two to three years.

Recommendations for Employers

Once SB 358 becomes law, employers may begin to see more complaints filed with the California Division of Labor Standards Enforcement (DLSE) – and in court – alleging a failure to provide equal pay.  There are several steps an employer may wish to consider to help minimize the risks of noncompliance with newly amended Section 1197.5: 

  1. Review all compensation-related policies and procedures with counsel to ensure all additional requirements are met. 
  2. Review employees' job descriptions and current salaries to ensure any pay differentials are completely accounted for by any or all of the above-numerated factors.14
  3. Train anyone who makes compensation-based decisions on the amended statute's requirements and on what factors compensation decisions can be based.
  4. Confirm there is an adequate internal complaint procedure to bring to light and address any wage differential issues.
  5. Review any references to compensation in employee handbooks to ensure their provisions are consistent with the newly-amended statute, including revising any blanket prohibitions in the handbook on employees disclosing their compensation to others.
  6. If an employer receives an inquiry from an employee about other employees' salary information, it may not preclude the employee from making such inquiry, but it may decline to disclose the salary of any of its employees.
  7. Update internal record retention requirements to reflect the new three-year retention period for records of the wages and wage rates, job classifications, and other terms and conditions of employment of the persons employed by the employer.
  8. Remind supervisors of employees' limited right to ask co-workers about their compensation for the purpose of ascertaining their rights under the amended statute. 


1.  Amended Section 1197.5(j)(2) ("Any employee who has been discharged, discriminated or retaliated against, in the terms and conditions of his or her employment because the employee engaged in any conduct delineated in this section may recover in a civil action reinstatement and reimbursement for lost wages and work benefits caused by the acts of the employer, including interest thereon, as well as appropriate equitable relief.").  All Code references are to the section as amended effective January 1, 2016.

2. The proposed federal Paycheck Fairness Act (S. 862, H.R. 1619), if passed, would add procedural protections to the Equal Pay Act of 1963 and the Fair Labor Standards Act to address male–female income disparity in the United States.  The federal legislation was introduced for reasons similar to those set forth for the new California Code amendments: to make wages more transparent, to require that employers prove any wage differentials are tied to legitimate business justifications, and to preclude employers from retaliating against employees who raise concerns over a differential in their wages.  See  Ilyse Schuman, Senate Committee Discusses Paycheck Fairness Act, Littler ASAP (Apr. 2, 2015). Given the current political climate, passage of the Paycheck Fairness Act is unlikely.  Versions of this bill have been introduced in every Congress since 1997.

3.  See  current Section 1197.5(a). The standard under the current version of Section 1197.5, before it was amended by SB 358, essentially mirrored that of the federal Equal Pay Act of 1963.

4.  See  amended Section 1197.5(a).

5.  Amended Section 1197.5(a)(1)(a)-(d).

6. See amended Section 1197.5(A)(1)(D) ("A bona fide factor other than sex, such as education, training, or experience. This factor shall apply only if the employer demonstrates that the factor is not based on or derived from a sex-based differential in compensation, is job related with respect to the position in question, and is consistent with a business necessity. For purposes of this subparagraph, "business necessity" means an overriding legitimate business purpose such that the factor relied upon effectively fulfills the business purpose it is supposed to serve. This defense shall not apply if the employee demonstrates that an alternative business practice exists that would serve the same business purpose without producing the wage differential." [Emphasis added.])

7.  Amended Section 1197.5(a)(2).

8.  Amended Section 1197.5(a)(3) ("The one or more factors relied upon account for the entire wage differential.").

9.  Under the federal Equal Pay Act (29 U.S.C. § 206), the prohibition against compensation discrimination applies only to jobs within the same establishment; courts must compare the wages of men and women performing the same jobs for the same company when considering a complaint brought under the Act.  Additionally, in defending a claim under the federal Equal Pay Act, an employer can rebut an allegation of discrimination in pay by showing that some other factor or reason resulted in the pay differential, which then requires the plaintiff to prove either that (i) the reasons the defendant advanced actually are pretext for sex discrimination, or (ii) that the differential either currently or, at one time, only could be explained by sex.  See Ryduchowski v. Port Auth., 203 F.3d 135, 142 (2d Cir. 2000); Yant v. U.S., 588 F.3d 1369, 1373 (Fed. Cir. 2009) (citing  109 Cong. Rec. 9208 (1963)).  See also  H.R. Rep. No. 88-309, at 3 (1963) (noting that the Equal Pay Act "declares that wage differentials based solely on the sex of the employee are an unfair labor standard" (emphasis added)); 109 Cong. Rec. 9196 (1963) (statement of Rep. Thompson) ("[The Equal Pay Act] only applies to instances where men and women are doing work and where there is a wage differential based solely on sex." (emphasis added)).

10. This is the primary difference between California's amended Section 1197.5 and the proposed Paycheck Fairness Act—the federal bill calls for almost unlimited compensatory and punitive damages.

11.  Section 1197.5(j)(1) ("An employer shall not prohibit an employee from disclosing the employee's own wages, discussing the wages of others, inquiring about another employee's wages, or aiding or encouraging any other employee to exercise his or her rights under this section.")

12. Section 11997.5(j)(1) ("Nothing in this section creates an obligation to disclose wages.").

13. Section 1197.5(j)(3).

14.  There are no retroactivity or grandfather provisions in the law; accordingly, employers should determine whether their compensation policies are compliant by the time the law goes into effect.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions