Job Killer Could Publicly Shame California Employers

A California Chamber of Commerce-opposed job killer that could publicly shame employers and expose them to costly litigation for alleged wage disparity where no violation of the equal pay law exists will be considered this week in a Senate policy committee.

AB 1209 (Gonzalez Fletcher; D-San Diego) imposes a mandate on California employers to collect data on the mean and median salaries paid to men and women under the same job title or description without also considering any bona fide reason for differences in compensation.

CalChamber has identified AB 1209 as a job killer because the bill will:

  • Create a false impression of wage discrimination or unequal pay where none exists and, therefore, subject employers to unfair public criticism;
  • Require the Secretary of State (SOS) to collect the employer’s data and then categorize it in a manner consistent with California’s Equal Pay Law; and
  • Expose employers to significant litigation costs to defend against meritless claims.  It also creates a privacy concern for employees and the disclosure of their wages.

AB 1209 Seeks to Publicly Shame Employers for Wage Disparities That Do Not Violate the Law

AB 1209 requires employers to collect data regarding salaries paid to men and women in the same job title or classification, submit that data to the SOS, where it will posted on a publicly accessible website and specifically attributed to the individual company. The intent is to publicly shame companies who report any disparities in pay amongst employees of different genders.

In its bill letter, CalChamber explains that wage disparities do not automatically equate to wage discrimination or a violation of law. The California Labor Code recognizes numerous, lawful, bona fide factors as to why wage disparities may exist between employees performing substantially similar work, such as: (1) different educational or training backgrounds amongst employees; (2) different career experience; (3) varying levels of seniority or longevity with the employer; (4) objective, merit-based system of the employer; (5) a compensation system that measures earning by quantity or quality of production; (6) geographical differences that impact the cost of living and job market; (7) shift differentials.

Publicly shaming companies for wage disparities that are not unlawful is simply unfair, will discourage growth in California, and expose employers to costs associated with defending against meritless litigation.

AB 1209 Appears to Require the Secretary of State to Categorize Information Received from an Employer

Recent amendments appear to add another burden and costs onto SOS.

AB 1209 states that an employer shall submit data of the mean and median salaries of men and women in the same job title or job classification to the SOS.  Thereafter, the data shall be categorized in a manner consistent with Labor Code Section 1197.5, which suggests that it is the SOS, not the employer, that is responsible for categorizing the data.

It is unclear how the SOS would categorize the data. First, the Labor Code requires employers to pay equal wages to employees who perform “substantially similar” work. Job titles and descriptions are not determinative of whether two jobs are the same for purpose of equal pay under SB 358 (the gender equity pay act enacted in 2015) or the federal Equal Pay Law.

Under AB 1209, the SOS would have to determine whether employees reported by the employer under the same job title or description are performing “substantially similar work,” or if employees reported under different job titles or descriptions are performing “substantially similar work.”

Second, the Labor Code provides that an employer may pay an employee performing “substantially similar work” different wages if it is based upon a bona fide factor. The SOS would have to determine if any wage disparities reported are based upon a bona fide factor. Again, it is unclear how the SOS would make this determination in order to categorize the information correctly.

Assuming the SOS could make these factual determinations for every employer to whom this bill applies, it also is unclear how this information would be utilized in litigation.

AB 1209 Requires an Employer to Carry the Employee’s Burden of Proof on an Equal Pay Law Claim

If, as amended, the requirement to categorize information consistent with the Labor Code is on the employer, the requirement unfairly forces an employer to carry the employee’s burden of proof under the Labor Code. Specifically, an employee who is pursuing an equal pay violation must prove that the employee is performing substantially similar work as another employee of a different gender and that the employee is being paid lower wages.

If AB 1209 requires an employer to categorize information consistent with the Labor Code, meaning the employer now has to identify employees under the same job title and description and those performing “substantially similar” work, AB 1209 is forcing the employer to establish the employee’s case. There is absolutely no need for the Legislature to ease the burden on a plaintiff to file a lawsuit against an employer by forcing the employer to establish the plaintiff’s burden of proof.

AB 1209 Utilizes Terms That Are Unclear as to What Data Should Be Included and May Be Impacted by Employee Choices.

AB 1209 requires employers to provide aggregate data regarding “salaries” and “compensation.”  It is unclear what such terms include. For example, is “salary” the employee’s annual gross salary or adjusted gross income? Does compensation include wages, salary, bonuses, overtime, company vehicles, travel expenses, vacation, sick leave, 401Ks, stock options, health benefits, etc.?  Such a broad category of information, much of which may be dependent upon the employee’s own decisions and actions, also can create wage disparity that has nothing to do with discriminatory intent by the employer.

An employee who asks to work reduced hours may earn a reduced salary. Moreover, if the employee is a “sales worker” or performing another job where the employee receives commissions or bonuses based upon his or her performance, this will create a wage disparity. Even though all employees in the equal or substantially similar position are working under the same commission or bonus plan, the employee’s own actions and performance will dictate what the employee actually earns.

Finally, the wage disparity also can be created by an employee’s personal choices as to pre-tax payroll deductions. One employee may max out all pre-tax deductions for a 401(k), dependent child reimbursement, medical expense reimbursement, college savings, etc., while another employee may not request any such deductions. None of these employee choices and actions will be captured or reflected in AB 1209 to justify a potential wage disparity. Again, this omission on the report will create the false impression of wage discrimination, where none exists.

AB 1209 Exposes Employees’ Private Financial Information

AB 1209 requires the SOS to publish employee salaries in accordance with the Labor Code. In some companies, there may be only one or two employees who perform a specific job. Accordingly, including the salaries of such employees in a report subject to public scrutiny will basically disclose such employees’ specific salaries that will easily be attributed to one particular person.

Although the Labor Code currently allows employees to voluntarily share their pay information with other employees if they so choose, it does not require an employee against his or her will to disclose that information. AB 1209 would force an employer to disclose this information even when the particular employee with whom the salary information will be identified, does not want that information publicized.

Action Needed

AB 1209 will be considered by the Senate Labor and Industrial Relations Committee on July 12.

The CalChamber is asking members to contact their senator and members of the Senate Labor and Industrial Relations Committee to urge them to oppose AB 1209 as a job killer.

An easy-to-edit sample letter is available at www.calchambervotes.com.

Staff Contact: Jennifer Barrera