Gender Pay Gap Transparency Act: A Push for Equality or a Waste of Time?

Pending legislation awaits Gov. Jerry Brown’s signature or veto

By June Bell October 3, 2017
Gender Pay Gap Transparency Act: A Push for Equality or a Waste of Time?

Update: Gov. Jerry Brown vetoed this bill on Oct. 15.

Gov. Jerry Brown soon will decide whether California's big businesses must reveal salary data for male and female employees, a move supporters say will help resolve women's entrenched pay inequity, but that critics argue would publicly shame businesses.

Brown has until Oct. 15 to sign or veto A.B. 1209, the Gender Pay Gap Transparency Act. If he does, businesses with at least 500 California-based employees will have to collect salary data for exempt employees and board members. Businesses would have to calculate the mean and median wages of males and females by job classification and title and the difference, if any, between them.

The information would have to be submitted by Jan. 1, 2020, to the California Secretary of State, which would publish it on a state website. Businesses would be required to provide the data every other year.

Critics claim the measure fails to consider factors that can skew pay rates, such as experience, part-time status and education.

"It's a lot of work for nothing," said Lauri Damrell, an attorney with Orrick in Sacramento. She is co-chair of the California Pay Equity Task Force and a member of the California Commission on the Status of Women and Girls. "It's no different than knowing we have a 20 percent pay gap nationally."

[SHRM members-only toolkit: Managing Pay Equity]

Litigation on the Horizon?

The legislation "gives plaintiffs' attorneys a road map to sue" and burdens businesses with the task of data collection, said Kristina Launey, an attorney with Seyfarth Shaw in Sacramento.

Comparing men's and women's salaries by job classification and title can lead to misleading conclusions, she said, because workers with the same title may have different levels of education and different amounts of experience or relevant skills—or they may have additional responsibilities that justify higher or lower pay. Critics say the salary data that the proposed law requires is too broad to be useful and too easily skewed by data for workers who earn unusually high or low wages.

Companies with several hundred employees may have just a few workers with each job title or classification, said Elaine Reardon, a Los Angeles-based director at Resolution Economics, an economics and statistics consulting firm. Because small sample sizes may inadvertently reveal specific workers' salaries, managers may be tempted to group disparate workers together for reporting purposes. "So you end up with numbers that can be different for a host of reasons that aren't related to discrimination," Reardon said.

A.B. 1209 notes that gender-based differences in wages do not necessarily indicate bias and are not, by themselves, a violation of California's Fair Pay Act, which took effect on Jan. 1, 2016. Labor attorneys said last year that their clients were struggling to comply with the law, which requires businesses to show that any pay disparities between men and women doing "substantially similar" work are based on a limited number of permissible factors, including education and seniority.

Pro and Con

The San Francisco Chronicle's editorial board has urged Brown to sign the bill into law, saying it would encourage transparency and help close the gender pay gap. Its sponsor, Assemblywoman Lorena Gonzalez Fletcher, D-San Diego, said the proposed law "will give the public very precise data about which big companies are paying women the salaries they deserve, and which aren't."

The California Chamber of Commerce opposes A.B. 1209. It criticized the legislation for requiring salary comparisons by classification and title, rather than by workers' duties and responsibilities that are "substantially similar," consistent with the state's Fair Pay Act. The business advocacy group fears that if the bill becomes law, companies' salary data could become fodder for frivolous lawsuits, which would be costly and time-consuming to defend.

The bill shares some similarities with new United Kingdom laws that require businesses with at least 250 employees to report data about men's and women's salaries, pay bands, bonuses and salary gaps. Companies must publish their results by April 2018 as part of a government effort to close a gender pay gap that it estimates to be at greater than 18 percent.

On the federal level, President Donald Trump's administration in August suspended an Obama administration-era requirement that federal contractors and companies with more than 100 employees provide detailed data about pay by race, ethnicity, gender and job category. The Equal Employment Opportunity Commission rule, which businesses decried as a compliance headache and a waste of time, was to have taken effect next year.

June D. Bell covers California labor and employment issues for SHRM.


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