“Raise your hand if you are for equal pay for equal jobs; no one would argue with that,” employment attorney Christopher Olmsted told a crowd of human resources executives at a Long Beach conference last week.
Hands flew up in the audience.
But Olmsted quickly warned, “The devil is in the details.”
On the first Labor Day since the passage of the 2015 California Fair Pay Act, touted as the nation’s toughest gender discrimination law, no workplace issue is grabbing more attention across the state.
Employment lawyers are predicting a wave of class-action lawsuits under the new statute, which makes it far easier to sue an employer for discrimination.
The law shifts the burden of proof to employers to show why a worker is paid less than a colleague and applies to companies of any size.
The new law has bosses scrambling to audit their payrolls, rewrite job descriptions, research industry comparables and document the reasons for individual discrepancies.
In certain cases, they are proactively boosting the wages of some workers and considering whether to cap the salaries of others.
“The earthquake has happened,” said Olmsted, whose firm, Ogletree Deakins, has five California offices, including one in Costa Mesa. “The tsunami is on its way.”
The law’s impetus was the state’s documented pay gap. In California, according to government data, a woman working full-time, year-round earned an average of 84 cents to every dollar a man earned.
The gender wage gap, although somewhat narrower than the national gap of 79 cents to a dollar, extends across almost all occupations in California.
The discrepancy is worse for women of color. Latina women in California make only 44 cents for every dollar a white male makes, the biggest gap for Latina women in the nation.
In July, Qualcomm, a multinational chipmaker, chose to settle a threatened class-action lawsuit before it was even filed in court, after plaintiffs uncovered extensive data on company practices.
Female engineers in Qualcomm’s San Diego headquarters alleged systemic discrimination in pay and promotions. Women hold less than 15 percent of Qualcomm’s leadership positions, according to the complaint.
Under the settlement, which covers 3,300 female employees, the company will pay $19.5 million in back wages. More significantly, it agreed to hire outside consultants to help revamp hiring, promotion, salaries, bonuses, complaint procedures, weekend and evening demands, and mentoring policies.
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The Qualcomm case follows a similar settlement last April in which Los Angeles-based Farmer’s Insurance Co. agreed to pay $4 million to some 300 women who worked as claims litigators.
The suit was brought by a Farmer’s Insurance attorney who discovered her male litigation partner was paid twice her salary, although he had less experience. Similar gaps were documented across the company’s national offices.
Farmers agreed to broad reforms in its pay practices as part of the settlement.
California’s aggressive law is part of a national trend. In 2009, the Lilly Ledbetter Fair Pay Act was the first new law President Barack Obama signed after taking office, fulfilling a campaign pledge to strengthen federal discrimination protections.
The law extended the statute of limitations for filing claims to within 180 days of the last discriminatory paycheck.
In January, the Obama administration announced an executive action to require companies with 100 or more employees to report to the government their employees pay by race, gender, and ethnicity.
“Why is the government making you do this?” asked Michele Patterson, a Rancho Palos Verdes attorney, addressing another group at the Long Beach conference. “Because it wants to catch you for discrimination!”
The three-day Professionals in Human Resources Association conference, a gathering of 2,400 employment personnel and exhibitors, featured no less than seven sessions focusing on the Fair Pay Act and federal gender discrimination law.
The floor of the vast Long Beach Convention and Entertainment Center was filled with exhibits from law firms promising protection against class actions and software companies touting auditing and data analysis to parse gender-related compensation.
With the new California law, “companies are going to have to do more due diligence to support pay decisions,” said Briana Heathcott, a conference attendee who oversees human resources for Costa-Mesa based Fisher & Paykel Appliances, which has 150 U.S. employees. “Does Jane Doe make the same as John Smith for the same job with the same experience? You never know until you lift up the rug (to see) what’s underneath.”
Many businesses are not waiting for lawsuits to materialize. Last year, Salesforce, the San Francisco-based software giant, undertook a voluntary audit. The result: $3 million in pay hikes for women, along with a few men.
This June, Obama announced The White House Equal Pay Pledge, under which companies commit to reviewing hiring and promotion practices and to conducting annual across-the-board gender pay analyses.
So far, more than 50 big corporations have signed on, including Apple, CVS, Facebook, Target, Hilton and General Motors.
California’s new statute tightens gender discrimination protection several notches beyond federal law. Golden State companies must show men and women are paid equally for “substantially similar work,” not just for “equal work.”
“That gives employees a lot of wiggle room,” said Greg Labate, an Irvine labor lawyer.
In the past, for instance, a hotel might pay a male janitor more than a female maid. Now, it would have to justify the disparity.
Labate advises clients to get their employees to sign arbitration agreements, waiving their right to sue in court, and sending disputes to privately hired arbitrators.
The controversial tactic means disputes are settled behind closed doors with no public disclosure, no right of appeal, and none of the strict procedural rules that courts follow.
“People question whether arbitration tends to favor employers,” Labate told a conference session. “I believe they do. I use the same arbitrators over and over, and they get paid when I pick them. They know where their bread and butter comes from.”
The California law also forbids discrimination across different locations of one company. In the past, employees could only sue based on unequal pay within a single establishment.
Now a bank with an East L.A. branch would have to show why it pays a manager less than at a West L.A. branch.
The change likely will centralize hiring decisions at company headquarters, where human resources professionals can standardize pay scales.
“Before, you’d have a guy in Bakersfield doing whatever the heck he wanted,” Olmsted said. “When local managers make hiring decisions, you see pay differentials and favoritism.”
Detailed hiring and performance information will determine the outcome of court cases, he added, “but I have yet to see one company able to put that on a data grid and showed me exactly why their employees are paid what they are being paid.”
Courts also will face the challenge of untangling the nuances of how and why various bona fide factors — such as education, quality and quantity of work, seniority, responsibilities, merit or geography — can justify a pay gap.
“You can pay Bob more if he lives in San Francisco than if he lives in Irvine, but you can’t pay him 25 percent more if the cost of living is only 10 percent more,” said Nancy Yaffe, a Los Angeles employment lawyer. “Education could be irrelevant if Bob (is) a CPA, but he is working in marketing.”
No wonder, she adds, “A lot of my clients are very overwhelmed.”
Patterson is helping several clients with audits, including a large Orange County company.
“I just got off my sixth phone call,” she said. “They are bogged down. The company has merged over and over, so compensation structures are all over the place.”
In many cases, she added, companies don’t have lawsuit-proof job descriptions.
“The job has morphed a million times, but they haven’t gotten around to updating the description,” she said.
Recruiting practices are likely to change. Companies will no longer be able to base a pay offer on a job-seeker’s previous salary, given that a woman might have been discriminated against by a previous employer.
“Statistics show men negotiate harder for opening salaries,” Yaffe said. “So they come in at a higher salary, and then 10 years later, you have a big pay differential.”
Employers will need to set written pay ranges for positions.
“You can’t just pop someone into a position and pay them a premium because you really want them,” Olmsted said.
The new law also prohibits companies from retaliating against employees who assert their equal pay rights or discuss salaries with each other.
“You can’t punish Sally for asking Bob,” Labate said.
The Irvine lawyer is guiding audits of several Orange County-based clients with thousands of employees across the country.
“They’re linking spreadsheets with education, experience, starting salaries, performance,” he said. “It is onerous, and incredibly complicated. But if they haven’t done the legwork, it could be a massive problem to do it on short notice.”
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