One year ago, California made groundbreaking amendments to its Fair Pay Act as issues of pay equity and the gender pay gap rose to national prominence. Now, two new amendments to the Fair Pay Act will extend the law’s coverage to address race- and ethnicity-based wage inequity and attempt to undo the effects of decades of pay discrimination.

One amendment, Senate Bill 1063, makes it a criminal misdemeanor for an employer to pay employees of one race or ethnicity less than it pays employees of another race or ethnicity for substantially similar work. The Fair Pay Act already made such disparate treatment illegal for workers of opposite sexes.

The other amendment, Assembly Bill 1676, clarifies that employees’ prior salary alone cannot justify a gender-, race- or ethnicity-based wage disparity under the Fair Pay Act.

Employers routinely use a worker’s pay history as a starting point for determining a salary offer. But pay-equity advocates point out that employees who are members of historically disadvantaged groups have long endured wage discrimination with the result that their wages today tend to be lower. Thus, pay scales based on prior earnings cannot help but reinforce that historical discrimination.

Correcting for Past Wage Discrimination

Under an exception to the Fair Pay Act, an otherwise prohibited wage differential is not unlawful if it results from a “bona fide” factor other than sex, race, or ethnicity—e.g., employees’ education, training or experience. The bona fide factor must also be related to the job in question and consistent with the employer’s overriding business purpose.

But confusion arose over just what other factors might fall under this exception. In particular, it was unclear whether pay structures based on employees’ previous salaries would fall under the bona fide factor exception if they resulted in an otherwise unlawful pay gap.

AB 1676 resolves the confusion by closing the potential loophole. The bill states that it will “help ensure that both employers and workers are able to negotiate and set salaries based on the requirements, expectations, and qualifications of the person and the job in question, rather than on an individual’s prior earnings, which may reflect widespread, longstanding, gender-based wage disparities in the labor market.”

Protecting against retaliation

Both amendments were signed into law September 30 and will go into effect January 1, 2017. In adopting the laws, the California Legislature noted that despite previous efforts to address pay inequity, in 2015 women in California earned around 84 cents for every dollar earned by men—a gender wage gap of 16 cents on the dollar.

The problem is particularly stark when race and ethnicity are taken into account. African American women in California make just 63 cents for every dollar made by white non-Hispanic men; Hispanic women make under 43 cents.

Employers may be resistant to change and even react negatively. But as we have previously noted, the Fair Pay Act makes it illegal for employers to fire or otherwise retaliate against employees for invoking the law’s protections or in any way assisting in its enforcement. Employees who believe their employer has violated the Fair Pay Act may pursue either administrative remedies with the California Department of Labor Standards Enforcement or a file a civil lawsuit.