Will California’s Fair-Pay Law Eliminate The Gender Wage Gap?

Kim-Shree Maufas comes from generations of California women who have worked alongside men without receiving equal compensation. From her grandmother, who left sharecropping to become a licensed vocational nurse, to her mother, who worked as an industrial mechanic, Maufas said the women in her family are all too familiar with the sting of being paid less than a man for performing the same tasks.

Maufas, who works as an executive assistant at a San Francisco public relations firm, said she is fortunate to work at a female-dominated company with an equity pay policy, where she doesn’t feel discriminated against or unequally compensated for her labor. But in her previous jobs doing accounting work for firms, she remembers not always feeling so certain.

“The idea that [my mother] was dealing with as much danger and needed as much training and education as men did, but wouldn't possibly be getting the same pay, is just devastating. And it has happened constantly,” Maufas said. “I could certainly say that maybe I was not getting paid the same as a male counterpart in that private-sector world.”

Maufas is one of millions of female workers in California who may now find it easier to take an employer to court for unequal compensation, thanks to the state’s new fair-pay law, which took effect Friday. But while the legislation is being touted by its proponents as the toughest such law in the country, some have voiced concerns that it could be logistically complicated to roll out and leaves not only companies but also individual managers and executives susceptible to potential lawsuits.

“That’s obviously scarier from a personal standpoint,” said Heather Sager, who specializes in employment law at the San Francisco firm Vedder Price. “Is it really fair to hold the head of that company responsible for what I, as a defense attorney, would likely argue are lone-wolf errors?”

California’s Fair Pay Act was signed by Gov. Jerry Brown in October and expands existing federal legislation that prohibits employers from paying women less than men for equal work. Under the state’s new law, employees are protected from workplace wage secrecy policies and retaliation for invoking the legislation. The burden of proof has been shifted to employers, who must prove they pay workers of both genders equally for “substantially similar work,” regardless of job title or location, unless the company has a bona fide business- or non-gender-related reason. The legislation cites data revealing that California women earn an average of 84 cents for every dollar earned by men. The national average remains roughly 79 cents per dollar for full-time female workers, compared with their male colleagues.

Due to the broadness of the law and its increased onus on employers, Sager said she now encourages executives to embark on what they have traditionally been reluctant to do: implement potentially complicated or expensive audits, employee surveys and financial analysis of compensation packages to ensure the companies are “bulletproof” and aren’t leaving themselves open to lawsuits. The San Francisco-based company Salesforce, for example, reported it spent an extra $3 million on payroll expenses in 2015 in an effort to review the software company’s 17,000 employees’ salaries and ensure there was no gender pay gap.

While C-Suite executives are often reluctant to expend time and money on laborious company audit that may uncover nothing of concern, Sager said the preventative measures will always be cheaper in the long run than dealing with a class-action lawsuit. But Sager said it’s now more important ever that companies evaluate not just salaries, but the on-the-ground workplace experiences their employees encounter every day. If wage parity exists but workplace culture and ambiguous bonus packages appear to favor male employees, for example, the company is still liable.

“It's extremely challenging, if not impossible, to win this type of litigation on the employer's side based on paperwork and policies alone,” she said. “There's always an element of the reality of the workplace, and if the employer is not up to speed on what's going on from a practical standpoint, they're not going to be able to fulfill their burden of proof on the defense side.”

The legislation was first introduced by Democratic state Sen. Hannah-Beth Jackson just days after actress Patricia Arquette used her Acadamy Award speech in February 2015 to call attention to the country’s gender pay gap. Jackson used the public attention Arquette brought to the issue to fuel support in the state, which has been scrutinized for high-profile instances of gender discrimination in Hollywood and Silicon Valley.

“To every woman who gave birth to every taxpayer and citizen of this nation, we have fought for everybody else’s equal rights. It’s our time to have wage equality once and for all and equal rights for women in the United States of America,” Arquette said after winning the best supporting actress Oscar.

The law also comes after last year’s infamous gender discrimination lawsuit filed by Ellen Pao, a former partner at Silicon Valley venture capitalist firm Kleiner Perkins Caulfield & Byers who alleged the company had promoted men rather than women and didn't support women who had complained of sexual harassment. Although a civil jury ruled the firm did not discriminate against Pao, the incident shone a national spotlight on gender discrimination problems in California’s booming tech industry.

President Barack Obama has addressed the gender pay gap in the U.S. time and time again during his administration to little effect. The Lilly Ledbetter Fair Pay Act, Obama's first bill signed in office, allows women more time to file a discrimination lawsuit — but the law didn't address wage transparency or provide women with the means to know when they're being discriminated against. In the absence of federal legislation, states have taken it upon themselves to pass laws to address the wage gap. In addition to California, New York, Connecticut, Delaware, Illinois, North Dakota and Oregon all passed equal pay legislation in 2015, while Massachusetts has two bills pending. Roughly 21 other states also had equal pay bills defeated during the same time period, according to data kept by the American Association of University Women.

Legal experts said despite the logistical kinks and trepidation from employers, the California law is ultimately a positive step for women that could spark a ripple effect across the U.S. and inspire similar legislation in other states. Emily Martin, vice president and general counsel for the D.C.-based National Women’s Law Center, said the law may well lead to some legal disputes over the definition of “substantially similar work,” but it’s not a bad thing that employers are being encouraged to think critically about the justifications they use to determine pay scale, and whether those reasons really are business- or job-related.

“[The law] recognizes that one of the best ways to fight pay discrimination is with sunshine, and that if people don't know how much their co-workers are making, they'll never know if they're experiencing pay discrimination,” Martin said. “The extent that there's some question about what ‘substantially similar’ means, what I think it will do that's a really valuable thing is lead employers to take a closer look at their own pay practices to try and ensure that they are meeting this really strong, protective legal standard.”