As a result of recent amendments, a California Chamber of Commerce-opposed bill dealing with pay data disclosure has been removed from the job killer list.

SB 1284 (Jackson; D-Santa Barbara) was amended on August 8 to help rectify the public shaming aspect of the bill and therefore remove the job killer tag. CalChamber remains opposed to SB 1284 because of the administrative burden it still places on employers by requiring them to turn over pay data information that could give the false impression of pay disparity where none may exist.

Creates False Impression of Wage Discrimination

SB 1284 requires employers to collect pay data in the aggregate. Doing so will likely demonstrate wage disparity amongst employees in the different job classifications or titles according to gender.

A disparity in wages, however, does not automatically translate into wage discrimination or a violation of the Labor Code. Specifically, SB 1284 seeks to collect pay data according to job title, not according to whether the jobs are “substantially similar” for purposes of comparison.

The term “substantially similar” was adopted in Labor Code Section 1197.5 to capture the intent of equal pay—meaning that employees who, with minor deviations, perform the same work according to a composite of skill, responsibility and effort, should be paid the same wage rate, unless a bona fide factor for the disparity exists. The example used in the legislative debate on SB 1284 compared a housekeeper at a hotel who cleaned hotel rooms versus a janitor who cleaned the lobby. Although a housekeeper and janitor may be “substantially similar” based upon the skill, responsibility and effort required, it is unlikely that employees will have the same job title.

Aggregate data as proposed in SB 1284 fails to take these valid, non-discriminatory reasons into consideration and will create a false impression of wage discrimination where none exists. For example, there could be a disparity in the mean of salaries between two exempt employees because one employee has worked for the employer for only 6 months, whereas the other employee has been with the employer for 10 years.

In addition, a wage disparity could exist because one employee may be hired directly out of college while another employee has five years of prior experience in the same position. Moreover, a pay disparity could exist because one employee negotiated a higher salary while the other negotiated more flexible hours. These factors will not be effectively captured in the aggregate data under SB 1284, creating the impression of an equal pay violation where none may actually exist.

SB 1284 Requires California Employers to Comply with a New, Separate Mandate

As drafted, SB 1284 presumes that the federal EEO-1 pay data reporting requirement already went into effect; however, the federal government has suspended the pay data provision of the EEO-1 reporting requirement. Thus, SB 1284 creates a new reporting requirement for employers that do business in California. Also, SB 1284’s mandate is not identical to the proposed EEO-1 pay data reporting requirements that were supposed to go into effect.

For example, the lookback period for SB 1284 is one year from any pay period between July 1 and September 30 of each reporting year. In contrast, the EEO-1 proposed regulations were going to use a lookback period from October 1 to December 31. Thus, by using the proposed EEO-1 Report, employers will actually be in direct violation of SB 1284. This is just one example of the inconsistencies that will overburden employers by requiring them to comply with a new and separate mandate.

SB 1284 Utilizes Data That May Be Affected by Employee Choices

SB 1284 requires employers to provide pay data regarding an employee’s total earnings as shown on the Internal Revenue Service’s Form W-2. However, a W-2 form does not take into account an employee’s own decisions and actions that also can create wage disparity which has nothing to do with discriminatory intent by the employer.

For example, an employee’s request to work part-time, reduced hours, or only on specific shifts that pay a lesser rate than others, will have an impact on the wages he or she earns. Per diem employees may work only one shift per month, at the employee’s own request. Moreover, if the employee is a “sales worker” or performing another job where the employee receives commissions or bonuses based upon his or her performance, this will create a wage disparity. Even though all employees in the substantially similar position are working under the same commission or bonus plan, the employee’s own actions and performance will dictate what the employee actually earns.

Finally, a wage disparity also can be created by an employee’s personal choices as to pre-tax payroll deductions. One employee may max-out all pre-tax deductions for a 401(k), dependent child reimbursement, medical expense reimbursement, college savings, etc., while another employee may not request any such deductions be made to his or her paycheck. None of these employee choices and actions will be captured or reflected in the data collected pursuant to SB 1284 to justify a potential wage disparity. Again, this omission on the report will create the false impression of wage discrimination where none exists.

SB 1284 Is Premature

SB 1284 is premature because there is a Pay Equity Task Force assigned to analyzing the Equal Pay Act, as well as workplace and compensation policies that can lead to successful compliance with the act. The task force is supposed to release a report this year about the act. Thus, SB 1284 is premature and the Legislature should wait for the task force report before imposing a new mandate on employers.

Action Needed

SB 1284 is set for hearing in the Assembly Appropriations Committee on August 15. The CalChamber is encouraging members to contact their Assembly representatives and Assembly Appropriations members to urge them to oppose SB 1284.

For more information on the remaining job killer bills, visit www.CAJobKillers.com