USA – CALIFORNIA Trends and Developments Contributed by: Sanford Heisler Sharp McKnight, Sanford Heisler Sharp McKnight
existing pay reporting requirements designed to foster greater pay equity. It turns the annual pay-data report into a tool that the state’s Civil Rights Department uses to find pay disparities, and it makes the penalties for failing to file mandatory rather than optional. The information that your employer reports does not sit in a drawer; it goes to the same division that investigates discrimination and enforces equal-pay law. You Can Now Recover Lost Wages Going Back Six Years SB 642 lets you recover for the entire period that an unequal-pay violation persisted, up to six years, and it treats every discriminatory paycheck as a fresh vio - lation. That distinction is the heart of the change. Under prior formulations, a pay decision made years ago could be out of reach even though the employee continues to experience unequal pay. Under the bill, each pay - check issued under a discriminatory policy or practice restarts the clock, so a gap that has quietly persisted does not become untouchable in a lawsuit simply because it began long ago. The clock does not run out on your claims until three years after: • your employer ends the discriminatory practice and It is worth looking at an example of how this could play out in practice. Suppose that two employees of differ - ent genders do substantially similar work under similar working conditions, and one is paid USD15,000 a year less than the other for reasons that have nothing to do with seniority, merit or any lawful non-discriminatory factor. Over six years, that amounts to USD90,000 in unpaid wages, before the law’s provisions for liqui - dated (double) damages, interest and other relief are even considered. This example illustrates the scale and impact of the law, not an automatic result: the disparity has to be proven, and the employer’s defences still apply. How - ever, it explains why a difference that looks small on a single paycheck is not small over time – and this is the case for an individual worker. If the employer adopts a similar discriminatory practice towards a begins paying you fairly; or • you leave your employment.
large number of employees, when multiplied out, the losses and potential recoveries can reach many mil - lions of dollars. Your Bonus and Your Equity Count, Not Just Your Salary For equal-pay claims, SB 642 now defines “wages” to reach nearly all compensation: bonuses, profit-shar - ing, stock, stock options and restricted stock units, allowances and most benefits – not base salary alone. This closes a gap that has long hidden real dispari - ties. Two employees can carry nearly identical salaries while a discretionary bonus or an equity grant stacked in favour of members of one gender opens a six-figure compensation difference between them. A compari - son that looks only at base pay would show a false parity that does not exist. The point often lands hard - est in the technology sector, where so much compen - sation arrives in the form of stock. This should not give employers licence, for example, to bestow sweetheart compensation deals on white men while withholding them from similarly situated members of other groups. The authors’ own work in the sector, including a USD19.5 million settlement with Qualcomm on behalf of roughly 3,300 women in STEM, turned on exactly this principle: pay has to be compared in full. Pay Must Be Based on Non-Discriminatory Factors That Cannot Include Prior Salary or Salary History For several years, California has barred employers from setting your starting pay based on your salary history. See Cal Labor Code Sections 1197.5 (a)(4) and 432.3 (a). Indeed, to ensure compliance, employ - ers are prohibited from even seeking salary history information from applicants. See Cal Labor Code Sec - tion 432.3 (b). These provisions are based on the long- standing recognition that reliance on compensation history can often serve to incorporate and perpetuate past disparities. If your current pay was built on what you earned at a prior job, that history may be carry - ing an old disparity forward into your present salary. Instead, your pay must be based on your qualifica - tions, experience and what you actually do in your job. This is the primary theory at issue in Jong v Apple , an ongoing class action which alleges that, even after it
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