How new laws will affect the wage gap
There’s a new sheriff in town and its name is The People of the State of California. Think there’s no gender wage gap? Take that up with California’s Legislature who declared earlier this year that:
- In 2014, the gender wage gap in California stood at 16 cents on the dollar. . . This wage gap extends across almost all occupations reporting in California [and] is far worse for women of color; Latina women [making] only 44 cents for every dollar a white male makes . . .
- Collectively, women working full time in California lose approximately $33,650,294,544 each year due to the gender wage gap. The wage gap contributes to the higher statewide poverty rate among women, which stands at 18 percent, compared to approximately 15 percent for men, and the poverty rate is even higher for women of color and single women living with children.
- Pay secrecy . . . contributes to the gender wage gap, because women cannot challenge wage discrimination that they do not know exists. Although California law prohibits employers from banning wage disclosures and retaliating against employees for engaging in this activity, in practice many employees are unaware of these protections and others are afraid to exercise these rights due to potential retaliation
- To eliminate the gender wage gap in California, the state’s equal pay provisions and laws regarding wage disclosures must be improved.
Those are powerful findings and they resulted in the passage of a powerful act, geared as much toward changing the culture that perpetuates wage disparities on such a staggering scale as creating laws sufficiently strong to finally close the gap.
Also, for those opposed to more taxes on corporate entities, consider the benefit of putting $33,650,294,544 into the hands of workers to stimulate the already robust California economy.
What the New Law Requires
Let me preface this discussion with an “on the ground” observation. As a litigator and trial attorney of 25-plus years practice and a mediator and arbitrator of ten years duration, my DNA is encoded with the law’s benefits and its all but hopeless deficiencies. I personally spent ten years litigating the meaning of the word “sudden.”And I was late to the “sudden” party, which had been taking place for decade before I stumbled through its door.
So I’m not terribly excited about the new legal claims created by this law because you could spend a decade or two litigating the meaning of the terms substantially similar work and composite of skill, effort and responsibility. This isn’t a full employment for lawyers act. It’s an effort to change the culture of the workplace.
For my lawyer readers, however, I’ll provide the heart of the act contained in Cal. Labor Code section 1197.5(a):
An employer shall not pay any of its employees at wage rates less than the rates paid to employees of the opposite sex for substantially similar work, when viewed as a composite of skill, effort, and responsibility, and performed under similar working conditions, except . . . [ here ]
Given my skepticism of the common law developing definitions over the next ten or twenty years, why am I excited that this new law has been passed?
Because I know that the law follows the culture [see gay marriage] not the other way around. And the purpose of this law is to create a change in the culture in which employers conduct their business and employees conduct their financial affairs in a way that is mutually beneficial. Employees will negotiate the best pay possible for the value they bring to the employers’ business and the employer will incentivize its employees to give their jobs their finest efforts (yes, I’m an optimist).
How the Law Encourages Gender Parity Culture Change
O.K. That sounds boring. Right? Tedious? Yes! For the employers it certainly is. Yet, be assured HR professionals, managers and entrepreneurs, your interests are being protected by the employer-side members of the California Pay Equity Task Force of which I am a member (and my own vision is pretty balanced on the employer-employee see-saw having served the negotiation needs of women for six years compared to the twenty-five I spent representing the interests of corporate America).
Sub-section (d) of the law requires employers to maintain records of the wages and wage rates, job classifications, and other terms and conditions of employment of the persons employed by the employer [for three years].
This is a very big deal. Perhaps the biggest of the big.
Knowing corporate America as I do, I’m acutely aware that 99.9% of all businesses are litigation-adverse. They have an entire category of employees who spend all their time managing risk. The risk management department is the most risk-adverse of all the players in any corporate setting (other than, of course, the legal department). When corporations are required to keep track of compensation by wage, titles, duties and the like for the purpose of insuring that they’re not paying men more than women, the risk management (and legal) departments will bother, hector, browbeat, irritate, harasss, swagger and torment the HR department about the risks posed by the wage disparities they find. Then they’re going to do something about it because its cost effective compared to the risk of litigation.
This is the optimistic view. For the pessimistic I’ll tell you that I have a friend who ascended the academic ladder to the status of dean of an entire school in a major university. When she was given the compensation data for all of the professors in that school, she told me privately that closing the gender wage gap for her school alone would bankrupt the…
That’s how bad it is boys and girls. And when corporate America is forced to view its job classifications and pay scales with a view toward complying with the new pay equity laws in the State of California, they’re going to have to take action to fix it or face the specter of both class and individual litigation on pay disparities.
Transparency Among Employees
There’s also good news for employees in this act – to change the culture around the water cooler. The law prohibits employers from squelching conversations about pay in section (j). That section provides that
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. Nothing in this section creates an obligation to disclose wages.
I’ve talked to hundreds of employees at all levels of the corporate lattice and most of them believe they’re not allowed to talk with their fellow employees about pay. A lot of people may not be forthcoming, but at least employees now have the right to talk to one another about pay without worrying they’ll be discliplined for it. That has the potential of creating a culture of wage transparency in the workplace.
And when a woman goes to HR and says “John is making $30,000 more a year than I am even though we’re doing the same job,” the company has a serious problem on its hands that it’s either going to have to spend the next five to ten years fighting about in court or step up to the line and take responsibility for, and fix, the pay gaps revealed by their own records and the understanding of their employees.
It’s a new era. Stay positive. The State of California is working on this. We’ve got your back.
Originally posted on LinkedIn on November 1st 2016