California has enacted two laws to address wage disparity, one prohibiting employers from paying employees at wage rates less than the rates paid to employees of another race or ethnicity for substantially similar work and another specifying that prior salary cannot by itself, justify a wage disparity.  

Welcome to the Compliance Center

California Expands Fair Pay Act

Dec 19, 2016

Background on the Final Law:
California has enacted two laws to address wage disparity, one prohibiting employers from paying employees at wage rates less than the rates paid to employees of another race or ethnicity for substantially similar work and another specifying that prior salary cannot by itself, justify a wage disparity.

Last year California enacted the Fair Pay Act to promote gender pay equity. It became effective on January 1, 2016 and prohibits paying employees at wage rates less than those paid to employees of another sex for substantially similar work. On September 30, 2016, California enacted the Wage and Equality Act adding race and ethnicity to the factors that employers may not use to justify pay disparity.

Substantially similar work is determined by looking at a composite of skill, effort, and responsibility, and performed under similar working conditions.

Wage differentials may exist if they are based on one or more of the following:

  • Seniority system
  • Merit system
  • System that measures earnings by quantity or quality of production
  • Bona fide factor such as education, training, or experience related to the position and consistent with business necessity.

Companion legislation, AB 1676, will prohibit employers from using prior salary to justify a pay disparity.  It does not prohibit an employer from asking for salary history

Impact on Employers:
Employers should review their pay policies and procedures to ensure compliance.

For more information, please see:
California Labor Code
SB 1063, the Wage and Equality Act of 2016
AB 1676