Proposed California Assembly Bill 1209, if passed in its present form, will require companies to have information regarding gender pay differentials published on the Internet.
Effects of Pay Inequity
In 2016, the U.S. Congress Joint Economic Committee released a report stating that working women earn approximately 79 percent of what men earn, which can amount to nearly half a million dollars over the course of a woman's career. Pay inequity has devastating effects on individuals, companies, and the workforce. Internally, it can cause reduced output and higher absenteeism, resulting in decreased economic productivity. It has also been shown to play a role in anxiety and depression rates in women. Externally, disparities in pay can lead to a tarnished or stunted brand.
In addition, companies may face costly litigation when pay inequity exists. For example, the San Diego-based Semiconductor and telecommunications giant, Qualcomm, paid $19.5 million to settle a gender pay discrimination claim in July 2016, without a lawsuit ever being filed. In an attempt to promote a healthy and fair workforce, California has passed several laws that chip away at the pay gap. The most recent and transparent, AB 1209, builds upon the California Fair Pay Act ("CFPA") in terms of reporting pay gap data.
The Basics – California Fair Pay Act
The CFPA, which went into effect on January 1, 2016, states that "[a]n 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." In effect, the CFPA—stricter than its federal counterpart, the Equal Pay Act—requires that employers maintain data on pay differentials and ensure that any variance is justified by an acceptable factor listed in the Act. Though this has helped close the pay gap, one study conducted in 2016 revealed that the pay gap between men and women in California results in a total of $79 billion per year. We have a long way to go.
AB 1209
AB 1209, if passed and signed by the Governor, would require certain employers with 500 or more employees in California to collect certain information on gender pay differentials. Additionally, the Secretary of State will be required to publish the information collected on an internet site available to the public.
You read that right. Companies that fall under the aforementioned description will have gender pay differential reports published online. This includes statistics regarding the "difference between the mean salary of male exempt employees and female exempt employees," and the "difference between the mean compensation of male board members and female board members."
Even employers with less than 500 employees will be impacted, but on the federal front instead. Beginning March 31, 2018, the EEOC will also require pay data reporting. Those reporting requirements mandate that private employers with 100 or more employees report summary pay data (employers do not report individual pay or salaries) to the EEOC, to assist the EEOC in investigations of possible pay discrimination.
How To Get Ahead of AB 1209 and the EEOC's Reporting Requirements
If your company is required to file a statement of information with the Secretary of State and has over 500 employees (or over 100 according to the EEOC), there is one thing you need to do to prepare for AB 1209: be proactive! Conduct pay analysis under the guidance of appropriate experts and outside counsel so you are familiar with your company's data, determine how to categorize the report that will provided Secretary of State, and create a plan if you find that any changes need to be made internally.
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