On Oct. 6, 2015, California Governor Jerry Brown signed into law Senate Bill 358 (SB 358), amending California’s Equal Pay Act (CEPA) to make it easier for
workers to discover and prove the existence of unlawful gender-based wage differentials. While CEPA already prohibited employers from paying lower wages to
female employees as compared to their male coworkers for “equal work,” some courts had interpreted CEPA to mean that male and female employee comparators
must hold exactly the same jobs to require equal pay.
SB 358, which takes effect on Jan. 1, 2016, amends CEPA to expressly prohibit employers from paying any employee wage rates that are less than those paid
to employees of the opposite sex for “substantially similar work” (as opposed to “equal work”). Thus, under CEPA as amended by SB 358 and codified in
California Labor Code § 1197.5, employees with different job titles who work in different departments may be used as comparators for determining the
existence of unlawful gender-based wage differentials, provided that their jobs are “substantially similar” in terms of skill, effort and responsibility.
A wage differential is now unlawful under CEPA law unless the employer can demonstrate that it is based on one or more of the following factors:
“(A) A seniority system.
(B) A merit system.
(C) A system that measures earnings by quantity or quality of production.
(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.”
As amended, CEPA now also expressly requires employers to keep records of wages and other terms and conditions of employment for three years. CEPA also now
contains enhanced anti-retaliation provisions, as follows:
“An employer shall not discharge, or in any manner discriminate or retaliate against, any employee by reason of any action taken by the employee to invoke
or assist in any manner the enforcement of this section. 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
Notably, although CEPA now protects employees’ right to inquire about the wage rates of other employees, it does not require the employer to respond to
In order to ensure compliance with CEPA as amended by SB 358, employers should review their compensation programs and examine the pay rates of employees of
different genders performing substantially similar work in terms of overall skill, effort and responsibility. Where pay disparities are found, employers
should determine whether they can be justified on the basis of legitimate factors such as a merit or seniority system, a system that measures earnings by
quantity or quality of production, or differences in education, training or experience that is job-related and consistent with business necessity. If these
legitimate factors are lacking, employers should consider increasing pay rates, where necessary, to address any apparent gender-based wage differentials.
For questions regarding California’s Equal Pay Act or its amendments, please
reach out to your McGuireWoods contact, the authors or any other members of
the McGuireWoods California labor and employment group.