I. Introduction
Generally, both state and federal law prohibit employers from paying wage rates to employees that are less than the wage rates paid to employees of the opposite sex: the Equal Pay Act of 1963 (the Federal Equal Pay Act) , and the California Equal Pay Act of 1949 (the California Equal Pay Act) . The California Equal Pay Act also prohibits employers from paying wage rates to employees less than the wage rates paid to employees of another race or ethnicity. These equal pay laws typically only apply to employees performing equal work (under the Federal Equal Pay Act) [1] or substantially similar work (under the California Equal Pay Act) [2]. The Federal Equal Pay Act and the California Equal Pay Act have many similarities, but they also have some important nuanced differences. This article highlights those similarities and differences and explains how the Equal Pay Acts are applied in California and throughout the country.
II. Legal Background
There are two primary equal pay laws:
- The federal Equal Pay Act of 1963, and
- The California Equal Pay Act of 1949.
Several other laws prohibit pay discrimination, such as Title VII of the Civil Rights Act of 1964 (federal antidiscrimination law) and California’s Fair Housing and Employment Act (California antidiscrimination law). While these laws generally prohibit workplace discrimination, they are not necessarily focused on equal pay. Therefore, this article will focus primarily on federal and California Equal Pay Acts.
III. Which Employers Do the Equal Pay Acts Cover?
A. Which Employers Does the California Equal Pay Act Cover?
All California employers (both public and private) must comply with the California Equal Pay Act [3]. However, public employers (i.e., government employers) are not subject to the California Equal Pay Act’s criminal liability provision [4]. However, they are still subject to the rest of the California Equal Pay Act.
B. Which Employers Does the Federal Equal Pay Act Cover?
The federal Equal Pay Act applies to nearly all employers. According to the federal regulation, the federal Equal Pay Act does not apply to employers that both (1) have no employees who are engaged in commerce or in the handling of goods that have moved in commerce, and where (2) the employer is not an enterprise engaged in commerce or in the production of goods for commerce [5]. Examples of these employers may include local family-owned businesses, small farm operations, etc.
IV. Which Types of Employees Are Protected by the Equal Pay Acts?
A. The Equal Pay Acts Do Not Protect Independent Contractors
Both the federal and California Equal Pay Acts are intended to protect employees. Therefore, the Equal Pay Acts do not protect other types of workers, such as independent contractors. However, if an independent contractor can prove that they were misclassified and that they should have actually been classified as an employee, then that worker may become protected by the Equal Pay Act once they are properly reclassified as an employee.
V. What Specific Protections Do the Equal Pay Acts Provide?
A. What Specific Protections Do the Federal Equal Pay Act Provide?
According to the federal Equal Pay Act, “[n]o employer…shall discriminate, within any establishment in which such employees are employed, between employees on the basis of sex by paying wages to employees in such establishment a rate less than the rate at which he pays wages to employees of the opposite sex in such establishment for equal work on jobs the performance of which requires equal skill, effort, and responsibility, and which are performed under similar working conditions…” [6]
However, an employer will not be liable for a violation of the federal Equal Pay Act if the employer can demonstrate that the wage payments made were “made pursuant to (i) a seniority system; (ii) a merit system; (iii) a system which measures earnings by quantity or quality of production; or (iv) a differential based on any other factor other than sex…” [7] However, if an employer is relying on one of these exceptions, the employer may not reduce the wage rate of any employee in order to come into compliance. [8] The federal regulations expressly state that “[w]hen a violation of the Act is established, the higher rate paid for equal work is the standard to which the lower rate must be raised to remedy a violation of the Act” (i.e., as opposed to lowering the higher rate). [9]
B. What Specific Protections Do the California Equal Pay Act Provide?
The California Equal Pay Act contains two primary protections. The first primary protection is based on gender, and the second is based on race or ethnicity. Note that the federal Equal Pay Act only prohibits sex-based unequal pay, while the California Equal Pay Act prohibits both sex-based and race-based and ethnicity-based unequal pay.
According to the California Equal Pay Act, “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…” [10] Several key terms in this statute are defined and explained below.
The California Equal Pay Act also provides that “an employer shall not pay any of its employees at wage rates less than the rates paid to employees of another race or ethnicity for substantially similar work, when viewed as a composite of skill, effort, and responsibility, and performed under similar working conditions…” [11] Several key terms in this statute are defined and explained below.
However, an employer will not be liable for a violation of the California Equal Pay Act if the employer can demonstrate (1) the wage differential is based on either a seniority system, a merit system, a system that measures earnings by quantity or quality of production, and/or a legitimate factor other than sex (or race or ethnicity), such as education, training, or experience; (2) each factor is relied on reasonably; and (3) the one or more factors relied upon account for the entire wage differential. [12]
VI. What Wage Rates Do the Equal Pay Acts Cover?
Under both the federal and California Equal Pay Acts, to determine if an employer has paid employees differently, the law looks at wage rates, as opposed to the total wages paid. This is an important distinction. For example, an employer may not pay a female employee a lower wage rate but justify the disparity by paying higher commissions or bonuses to evade Equal Pay Act liability [13]. Similarly, an employer who pays a woman $10 per hour and a man $20 per hour would still violate the Equal Pay Acts, even if the woman made up for the difference by working twice as many hours. [14]
A. What Wage Rates Do the Federal Equal Pay Act Cover?
According to the federal regulations, the term wage rate refers to all forms of wages, “whether calculated on a time, commission, piece, job incentive, profitsharing, bonus, or other basis. The term includes . . . overtime compensation [and also] includes the rate at which a draw, advance, or guarantee is paid against a commission settlement.” [15]
B. What Wage Rates Do The California Equal Pay Act Cover?
Like the federal Equal Pay Act, the California Equal Pay Act determines whether pay is equal based on wage rates. [16] The California Equal Pay Act does not specifically define the term wage rate.
Examples of wages under the federal and California Equal Pay Acts include:
- wages, salary, overtime pay, and bonuses;
- vacation and holiday pay;
- use of a company car, gasoline allowances, and hotel accommodations;
- medical, hospital, accident, and life insurance benefits; and
- retirement benefits and profit sharing.
Additionally, stock options may also be a form of wages under the Equal Pay Acts. [17]
VII. What Is Equal Work Performed under Similar Working Conditions?
A. According to the Federal Equal Pay Act, What Is Equal Work Performed Under Similar Working Conditions?
1. What Is “Equal Work” under the Federal Equal Pay Act?
The federal Equal Pay Act prohibits paying different wage rates on the basis of sex for “equal work…under similar working conditions…” [18] “Equal work” is defined as work that requires equal skill, effort, and responsibility. [19] The federal regulations explain that “equal work” is not determined by the job title, but instead by actual job requirements. [20] According to the Ninth Circuit, “jobs need not be identical to constitute ‘equal work’; they only need to be ‘substantially equal.’” [21] This requires that the plaintiff establish that (1) the jobs being compared have a common core of tasks; and (2) any additional tasks present in one job but not the other do not make the jobs substantially different. [22]
2. What Are “Similar Working Conditions” under the Equal Pay Act?
According to the federal regulations, “in order for the equal pay standard to apply, the jobs are required to be performed under similar working conditions.” [23] The term “similar working conditions” encompasses (1) surroundings regularly encountered by a worker, including their intensity and frequency; and (2) hazards, which takes into account the physical hazards regularly encountered by an employee. [24] It is important to note that slight or inconsequential differences in working conditions that are not usually taken into consideration by employers would not justify a differential in pay. [26] Finally, the federal Equal Pay Act requires that an employee’s equal work must not only be under similar working conditions but also at the same establishment. [26]
B. Under The California Equal Pay Act, What Is Substantially Similar Work Performed Under Similar Conditions?
Under the California Equal Pay Act, the standard is whether the work is “substantially similar” and performed under “similar working conditions.” [27]
1. What Is “Substantially Similar Work” under the California Equal Pay Act?
First, work is substantially similar if the skills, effort, and responsibilities required to perform the job are mostly similar. [28] This standard is much broader and more flexible than the federal Equal Pay Act. This standard can be broken down even further by comparing what the job requires in terms of:
- experience, ability, education, and training (skills);
- the amount of physical or mental exertion necessary to perform the job (effort); and
- the degree of accountabilities or duties required (responsibilities). [29]
When comparing skills, the question is what is necessary to perform the job. [30] If certain skills, effort, or responsibilities are not necessary for a specific job, then they cannot be used to justify unequal pay under either the federal or California Equal Pay Act. For example, it doesn’t matter if the higher-paid employee holds a more advanced degree than the lower-paid employee if the advanced degree is not required to perform the job.
2. What Are “Similar Working Conditions” under the California Equal Pay Act?
Second, work is performed under similar working conditions when the physical surroundings, such as the temperature, fumes, ventilation, and any hazards are similar. [31] In contrast to the federal Equal Pay Act, an employee can bring a claim under the California Equal Pay Act even if the wage differential exists between employees who work at different locations. This makes it easier for employees to establish a claim of pay discrimination.
VIII. What Are Allowable Defenses to the Equal Pay Acts?
A. Permissible Wage Differences under the Federal Equal Pay Act
The federal Equal Pay Act provides four exceptions for employers to evade wage discrimination liability. The federal exceptions are much broader than the California Equal Pay Act exceptions and therefore allow employers to qualify for the exceptions more easily. The federal Equal Pay Act permits employers to pay different wage rates, only when the employer can demonstrate that the wage differential is based on:
- A seniority system,
- A merit system,
- A system which measures earnings by quantity or quality of production, or
- A differential based on any other factor other than sex. [32]
The Ninth Circuit emphasized that the fourth exception—“any other factor other than sex”—should be limited to job-related factors, requiring employers to demonstrate that wage disparities are caused by job-related factors, not sex. [33]
B. Permissible Wage Differences under the California Equal Pay Act
The California Equal Pay Act permits employers to pay different wage rates, but only when the employer can demonstrate that the wage differential is based on:
- A seniority system, [34]
- A merit system, [35]
- A system that measures earnings by quantity or quality of production, or [36]
- A bona fide factor other than sex, race, or ethnicity, such as education, training, or experience. [37] This factor is limited as further explained below.
An employer can claim a bona fide factor other than sex, race, or ethnicity as the basis of a wage differential only if:
- the employer can show that the factor is unrelated to a sex-, race-, or ethnicity-based pay differential;
- the employer can show that the factor is job-related with respect to the position in question; and
- the factor is consistent with a business necessity. (This defense does not apply if the employee demonstrates that the employer could have used an alternative business practice to serve the same business purpose without the wage differential.) [38]
In California, an employer can never point to an employee’s past salary to justify a pay disparity. [39] But an employer may choose to make a wage decision based on the employee’s current salary if any resulting wage differential is justified by one or more of the specifically permitted factors.
Finally, if an employer relies on any of the legitimate factors described above, the employer must show it applied those factors reasonably and that those factors account for the entire differential. [40]
IX. Does the Employer’s Intent to Discriminate Matter?
Equal pay laws assess pay discrimination based on the existence of wage disparities rather than the employer’s intent. In other words, an employee does not need to prove that he or she was paid less because of his or her sex, race, or ethnicity. Discriminatory intent in not required to establish a violation. [41] The fact that the pay is different is enough if it exists between an employee and another employee who fits the description above.
Additionally, the California Equal Pay Act requires employers to maintain and keep on file each employee’s records of the employment terms including wages, wage rates, and job classifications for at least three years. [42]
X. The Federal Equal Pay Act Prohibits Certain Forms of Retaliation
The federal Equal Pay Act was enacted as an amendment to the Fair Labor Standards Act (FLSA). [43] The FLSA’s anti-retaliation provision makes it unlawful for employers to discharge or discriminate against any employee because they have filed any complaint or instituted any proceeding under or related to the FLSA. [44] The Ninth Circuit has interpreted this provision broadly to include complaints made to employers, not just those formally filed in court or with a government agency. [45] Additionally, the Department of Labor states that any individual who files an equal pay claim, or assists an individual in filing an equal pay claim is protected against unlawful retaliation by their employer. [46]
XI. The California Equal Pay Act Prohibits Certain Forms of Retaliation
The California Equal Pay Act ensures that employees have the right to discuss and disclose wage information without fear of retaliation from their employer. Employers may not fire, discriminate, or retaliate against an employee for complaining about an equal pay violation, filing an equal pay claim, or otherwise taking any action related to enforcing the California Equal Pay Act. [47] Employers also may not ban employees from talking about their own wages or their coworkers’ wages, asking about their coworkers’ wages, or helping coworkers exercise their rights under the California Equal Pay Act. [48] However, these standards do not require employers to disclose wages to employees. [49]
XII. Job Applicants Are Protected under the California Equal Pay Act
Job applicants are not explicitly protected under the federal Equal Pay Act. [50] However, while employees receive most of the protections under the California Equal Pay Act, job applicants are protected in a few important ways. These protections apply to all job applicants who are not currently employed by the employer in any way. [51]
Like the rules discussed in previous sections, these rules apply to all employers, including both public and private employers. [52] Specifically, an employer:
- cannot use a job applicant’s salary history to determine whether to offer employment or any certain level of salary to the applicant; [53]
- cannot ask a job applicant about his or her salary history, including past compensation and benefits; [54] and
- must provide a job applicant with a pay scale—for example a salary or hourly range—for the position if the applicant asks for this information after completing an initial interview with the employer. [55]
But an employer may:
- use an applicant’s salary history information to determine his or her salary if the applicant freely discloses that information; [56] and
- ask a job candidate about his or her salary expectations for the position. [57]
XIII. What Are the Options for an Employee That Has Been Affected by the Equal Pay Acts?
A. An Affected Employee Can File an Administrative Claim or a Private Lawsuit
Under the federal Equal Pay Act, an employee can file an administrative claim with the Equal Employment Opportunity Commission (EEOC) with respect to claims involving federal law [58]. The EEOC would then investigate and potentially prosecute the claim on behalf of the employee. [59] If the administrative claim is successful, the EEOC can supervise the payment of wages and interest due. Filing a claim with the EEOC precludes the individual employee from maintaining a private action on his or her own behalf, unless the EEOC later dismisses the action it commenced. [60] Instead of an EEOC claim, an employee can go directly to court and file a private lawsuit against the employer. The federal Equal Pay Act does not require an employee to exhaust administrative remedies before filing a private action against the employer in a court of competent jurisdiction. [61]
Under the California Equal Pay Act, an employee affected by an equal pay violation or a retaliation action may also choose to file an administrative claim or a private lawsuit. [62] The state administrative body that investigates and prosecutes claims on behalf of an employee under the California Equal Pay Act is the Division of Labor Standards Enforcement (DLSE). [63] An aggrieved employee may also file a private civil action without exhausting administrative remedies. [64] However, if an aggrieved employee consents to administrative action, the employee waives their ability to bring a private cause of action unless the DLSE dismisses the employee’s complaint without prejudice. [65] An employee may intervene in an action brought by the DLSE or may commence an independent action if the DLSE does not resolve the employee’s claim within 180 days after the date the employee files the complaint. [66]
B. Filing Time Limit (Statute of Limitations) For Equal Pay Act Lawsuits
An employee—or “claimant”—must file an equal pay or retaliation claim within a certain time limit (known as the statute of limitations) after the violation occurred.
For federal equal pay claims, the length of the filing time limit depends on whether the employer’s violation was willful or not. A claimant must file a civil action in a court of competent jurisdiction within two years. [67] However, if the violation was willful, a claimant has a time limit of three years of the date of the alleged federal Equal Pay Act violation regardless of whether he or she pursued any administrative complaint processing. [68]
For California equal pay claims, the length of the time limit also depends on whether the employer’s violation was willful. The time limit for filing a claim is three years for willful violations and two years for non-willful violations. [69] The time limit is measured from the date of alleged violation. Each paycheck that reflects unequal pay may be considered a violation. The clock begins to run from the date of each such paycheck. [70] For retaliation claims under the California Equal Pay Act, an employee has one year from the date of the retaliatory act to file a claim. [71]
C. What Is the Recovery for an Employee Who Wins an Equal Pay Act Claim?
Under the Federal Equal Pay Act, an employee may recover:
- unpaid wages plus interest;
- liquidated damages equal to the amount of the unpaid wages; and
- reasonable attorney’s fees and costs. [72]
Under the Federal Equal Pay Act, an employee who is discharged or otherwise retaliated against for attempting to enforce the equal pay requirements may be awarded “such legal or equitable relief as may be appropriate,” including:
- employment;
- reinstatement;
- promotion;
- lost wages;
- liquidated damages equal to the amount of lost wages; and
- attorney’s fees and costs. [73]
Under the California Equal Pay Act, an employee may recover:
- unpaid wages, plus interest
- liquidated damages equal to the amount of the unpaid wages; and
- attorney’s fees and lawsuit costs. [74]
Also, under the California Equal Pay Act, an employee who wins a retaliation claim may be able to recover:
- reinstatement;
- backpay (including lost wages and any benefits the employee would have received), plus interest; and
- in certain circumstances, equitable relief. [77]
D. Potential Criminal Penalties against an Employer That Violates the California Equal Pay Act
In addition to the civil penalties and various payments described above, an employer (or person) that violates the California Equal Pay Act may also be found guilty of a misdemeanor for willfully violating the California Equal Pay Act. [78] Public employers are exempt from the criminal penalties of the California Equal Pay Act. [79] An example of a violation may be engaging in discriminatory pay practices or reducing the wages of any higher-paid employee to comply with equal pay requirements. [80] If prosecuted and convicted, an employer (or person) that willfully violates the California Equal Pay Act may be subject to a criminal fine of up to $10,000 and—for repeat offenses—up to six months in prison. [81]
E. Equal Pay Act Class Actions
Class-action lawsuits are brought by one or more employees on behalf of a larger group of similarly situated employees. A class-action lawsuit is typically used when numerous employees want to make similar claims against their company. This type of lawsuit avoids the challenge of joining all individual employees in a single lawsuit and prevents the potential for inconsistent verdicts in separate lawsuits. To begin a class-action lawsuit, only one employee needs to file the case as the class representative. Depending on the case, a class-action lawsuit is filed in either federal or state court. While serving in this role, the class representative must act in the best interests of the other wronged employees affected by the employer’s violation of the federal or the California Equal Pay Acts.
Both the California Equal Pay Act and the federal Equal Pay Act allow affected employees to file civil claims for damages against their employer(s). Affected employees can choose to file these civil claims either on their own behalf, or otherwise on behalf of other similarly situated affected employees as a class action.