Understanding the New Laws on Pay Equity

California passed its Fair Pay Act in 2015, ostensibly to tighten existing laws prohibiting pay discrimination and to eliminate pay disparities between men and women. Effective Jan. 1, 2016, it modified existing law regarding who may qualify as an appropriate “comparator” for purposes of analyzing a pay disparity. It also modified an employer’s burden of proving that a pay disparity is justified by legitimate factors. Massachusetts, New York and Maryland followed suit with their own updated pay equity legislation, and California has additional legislation pending that will further amend the Fair Pay Act. Many other states and cities have since enacted their own laws.

The stated purpose of these laws is to prevent perpetuation of the pay gap between men and women. If a female applicant is already underpaid, then relying on her salary history when establishing starting pay will only perpetuate the gap. The author lists several steps that employers that have traditionally incorporated prior pay inquiries into their hiring processes should consider to address the trend. Among these are pay equity audits, which many employers are conducting to determine potential risks. The audits enable them to identify pay disparities within appropriate comparative groups.

The pay equity landscape continues to change, as state and local jurisdictions implement their own laws and regulations designed to combat pay disparities. Employers need to keep abreast of these new laws and be prepared to make the changes necessary to comply with them.