Q&A: How to Ensure Compliance with California’s New Fair Pay Law

November 25, 2015 – In The News
Society for Human Resources Management

Jeffrey D. Polsky was featured in the Society for Human Resource Management article, “Q&A: How to Ensure Compliance with California’s New Fair Pay Law.” Full text can be found in the November 25, 2015, issue, but a synopsis is below.

With California’s Fair Pay Act moving through legislative committees and eventually coming into law, Society for Human Resource Management asked Fox Rothschild’s Jeffrey Polsky to share his thoughts on the law and compliance measures associated with it's introduction.

How can my company protect its compensation data and analysis from being used against us if workers later file claims?

Polsky: Have your internal payroll people analyze the data with an attorney’s involvement. If changes are needed, do it and document them so you can refer to them down the road. Employers need to carefully document reasons for compensation decisions.

We’d prefer to analyze and adjust salaries over the course of the year, as workers’ annual reviews come due. Is this OK?

Polsky: The law takes effect Jan. 1, so employees are unlikely to face lawsuits under this law on Jan. 2. But employers should not wait to correct disparities if they determine that they exist. Depending on the size of the employer and the complexity of the issues, 90 days is certainly reasonable (but the judges and arbitrators who make these decisions don’t necessarily ask for my opinion).

When setting salaries for new hires, our company has typically looked at the compensation they received at their previous job and then started them at a slightly higher rate—regardless of their gender. We apply this policy fairly to men and women, so can we continue to do this?

Polsky: The people who make compensation decisions need to understand what are and what aren’t permissible variables. What someone made in their previous job may not be relevant if their salary can’t be justified by their education, experience or training, or other permissible variables in the new law. Prior compensation isn’t one of the permissible variables.

Remember that prior salary may also reflect the worker’s skill at negotiating a higher salary. And there’s at least a perception that men are more likely to negotiate than women. If a company does want to hire a superstar, [it needs] to be prepared to adjust the compensation of others doing substantially similar work and who have the same education, training and experience

Despite our best efforts to close the pay gap, we may still see some minute variations in compensation for men and women doing substantially similar work when they have the same education, experience, training, etc. Is that acceptable?

Polsky: I don’t know that any compensation plan will ever be bulletproof. Different statisticians could come up with disparities that others didn’t find. And what exactly does “substantially similar” mean? That question will have to be taken up by the courts and the appellate system.