Why the Governor Should Veto AB 1209

Chris Micheli
Attorney and Lobbyist at the Sacramento government relations firm of Aprea & Micheli, Inc.

While the business community is strongly in favor of gender pay equity and many of us worked diligently two years ago to enact SB 358 (Jackson) to make California’s Equal Pay Act the “toughest in the nation,” Governor Brown should veto AB 1209 (Gonzalez Fletcher), which is intended to publicly shame companies based upon a mistaken belief that such action is necessary to ensure compliance with the law.

SB 358 was signed into law in October 2015 and, with a looming effective date of January 1, 2016, companies began undertaking internal audits of their pay structures and whether any salaries or other forms of compensation (such as bonuses or pay increases) were based in any way on an employee’s gender. Any pay differentials that are based upon an employee’s gender violate the law. In several instances, where companies could not justify a pay differential, they increased the pay of individuals.

Keep in mind that SB 358 (which is codified at Labor Code Section 1197.5) allows pay differentials based only upon certain “bona fide factors,” the most common of which are education, training and experience. For example, if a software engineer has been employed at the same company for fifteen years, we would expect his or her salary to be more than that of someone just recently hired out of college. So long as this pay differential is not in any way based upon the gender of an employee, the pay differential is permitted because of the training and experience differences between these two individuals.

Unfortunately, AB 1209 is likely to result in companies showing pay differentials based upon job classification or title (a requirement of the bill, but which is not used in California’s Equal Pay Act). The issue is whether any of those pay differentials violate California law. Regardless, the fact that this information is made public on the Secretary of State’s website means that the company will face class action lawsuits because the plaintiff can simply point to this “showing” on the public website and claim in a civil lawsuit that the company has violated the law.

Pursuant to the Labor Code, the burden of proof shifts to the company to justify the wage differential. As a result, the company will be faced with a choice of paying a sum to settle the lawsuit, or pay a significant amount of money to defend the case and justify the pay differences among all of its employees in that artificial job classification or title. The news media reporting will at best gloss over whether the pay differential is lawful or not.

The idea of publicizing pay has hardly resulted in corrective action in other instances. For example, the salaries of legislative staff have long been made public by Capitol Weekly and yet their annual disclosures continue to show wage disparities between men and women with the same or similar job titles. The bottom line is that there will always be wage differentials in either direction – again, the key issue is whether any of those wage differentials violate the law. If they do, then those employers should be held liable for their unlawful conduct.

But before any publicizing is warranted, the employer must be determined to have violated the Labor Code. One of the very few instances in which California has a public shaming process in state law involves the top 500 tax delinquents. While that listing has not produced the recovery of past due taxes its proponents had hoped for, those individuals and businesses only make that public shaming list after they have been determined to properly owe taxes and which remain unpaid. The public shaming proposed by AB 1209 is based merely on an allegation of violating the Labor Code.

In the end, AB 1209 will simply result in unwarranted lawsuits being filed against companies in California. As much as all of us do not support pay discrimination based upon gender (or race or ethnicity either, which is also prohibited by law, but not covered by this bill), AB 1209 is not the solution for closing the gender pay gap.

Chris Micheli is a Principal with the Sacramento governmental relations firm of Aprea & Micheli, Inc.

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