BILL NUMBER: AB 2555 ENROLLED BILL TEXT PASSED THE ASSEMBLY AUGUST 22, 2006 PASSED THE SENATE AUGUST 17, 2006 AMENDED IN SENATE AUGUST 14, 2006 AMENDED IN ASSEMBLY MAY 26, 2006 AMENDED IN ASSEMBLY APRIL 17, 2006 INTRODUCED BY Assembly Member Oropeza FEBRUARY 23, 2006 An act to amend Section 1197.5 of, and to add and repeal Section 1197.7 to, the Labor Code, relating to wages. LEGISLATIVE COUNSEL'S DIGEST AB 2555, Oropeza Wages: gender pay equity. Existing law generally prohibits an employer from paying an employee at wage rates less than the rates paid to employees of the opposite sex in the same establishment. Existing law further imposes penalties on an employer who violates this provision, subjecting the employer to civil action and specifying liquidated damages that may be paid to an employee who is paid unfairly. This bill would increase the damages for which an employer may be liable to include a civil penalty of twice the balance of the wages due to the aggrieved employee, or 4 times the balance of the wages due if the employer's violation is willful, distributed to the Labor and Workforce Development Agency for specified purposes. Existing law requires an employer to maintain records of wages, wage rates, job classifications, and other terms and conditions of employment of the employer's employees. This bill would require an employer of 50 or more employees to provide each employee with a written statement setting forth the employee's job title, wage rate, and explanation as to how the employee's wages are calculated. This bill would require the Secretary of Labor and Workforce Development to appoint a commission comprised of representatives from various backgrounds to study pay disparities and report to the Legislature. This provision would become inoperative on April 1, 2008, and would be repealed on January 1, 2009. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. The Legislature finds and declares as follows: (a) Forty-three years after passage of the federal Equal Pay Act of 1963 (29 U.S.C. Sec. 206) and Title VII of the federal Civil Rights Act of 1964 (42 U.S.C. Sec. 2000e), American women continue to suffer disparities in wages that cannot be accounted for by age, education, or work experience. (b) California has prohibited gender-based pay discrimination since 1949. While Section 1197.5 of the Labor Code started out to redress the segregation of women into historically undervalued occupations, it evolved over the last four decades, such that today it is virtually identical to the federal Equal Pay Act of 1963 (29 U.S.C. Sec. 206(d)). The Equal Pay Act of 1963 also prohibits sex-based wage differentials between men and women employed in the same establishment who perform jobs requiring equal effort, skill, and responsibility. The Equal Employment Opportunity Commission enforces these provisions through a complaint process that is similar to that which exists under California law. Civil actions are allowed after administrative avenues are exhausted. Penalties allowed under federal law are similar to those under California law, and include recovery of an amount equal to the wages the aggrieved employee is denied as a result of the gender-based pay disparity, plus an additional equal amount as liquidated damages. A person who willfully violates the federal law, however, is subject to a civil penalty not to exceed one thousand dollars ($1,000) for each violation. (c) Current state law requires an employer to maintain records for two years of wages, wage rates, job classifications, and other terms and conditions of employment of the persons employed by the employer. (d) Under state law, an employer who willfully violates Section 1197.5 of the Labor Code is guilty of a misdemeanor, and may be punished by a fine of up to ten thousand dollars ($10,000), or by imprisonment for not more than six months, or by both, except that a prison term may not be imposed unless the employer has a conviction for a prior violation. (e) According to the United States Census Bureau, in 2002, American women working full time, year around earned on average seventy-six and three-fifths cents for every dollar earned by full-time working American men. The inequity particularly affects women of color, with African-American women earning sixty-five cents ($0.65) and Latinas earning only fifty-four cents ($0.54) for every dollar paid to a white male worker. (f) A General Accounting Office report on women's earnings shows that there exists an inexplicable wage gap of approximately 20 percent even after taking into account work experience, education, occupation, industry of current employment, and other demographic and job characteristics. And, interestingly enough, the Institute for Women's Policy Research found that a recent narrowing of the wage gap between men and women was due in large part to men's real wages falling, rather than women's wages rising. (g) Despite federal and state laws that ban discrimination in pay in both the public and private sectors, wage differentials persist between women and men and between minorities and nonminorities in the same jobs, and in jobs that require equivalent composites of skill, effort, and responsibility, and working conditions. (h) Wage discrimination not only harms individual women and people of color, it also depresses living standards, contributes to higher poverty rates among female-headed households, prevents the maximum utilization of available labor resources, causes labor disputes that burden commerce, and violates the state's express policy against discrimination. (i) Many occupations are dominated by individuals of the same sex, race, or national origin, and discrimination in hiring, job assignment, and promotion has played a role in establishing and maintaining segregated workforces. (j) Current remedies imposed on employers who practice discrimination in pay between men and women, and between minorities and nonminorities, have proven to be only partially effective in eliminating such wage disparities. (k) Understanding the full extent and causes of wage disparities between men and women and between minorities and nonminorities in the private and public sectors would enable the state to take more effective measures to reduce and eliminate discrimination in wage setting. (l) States have been the source for innovative solutions for narrowing the wage gap. In 1982, Minnesota implemented equal pay for all public sector employees. In 2005, Hawaii prohibited gender-based wage discrimination and established a pay equity task force to recommend remedies for wage inequity. Maryland, too, has created a commission to study disparities in pay between men and women and between minorities and nonminorities. In 2003, Illinois enacted a law prohibiting wage discrimination on the basis of gender, New Mexico and Utah passed bills requiring pay equity studies, and West Virginia created an equal pay commission. (m) This act is enacted to protect the health and welfare of California residents and improve the overall labor environment by correcting and deterring discriminatory wage practices based on sex, race, and national origin, developing reliable data about the extent of such wage discrimination, and providing greater understanding about its causes. SEC. 2. Section 1197.5 of the Labor Code is amended to read: 1197.5. (a) No employer shall pay any individual in the employer' s employ at wage rates less than the rates paid to employees of the opposite sex in the same establishment for equal work on jobs the performance of which requires equal skill, effort, and responsibility, and which are performed under similar working conditions, except where the payment is made pursuant to a seniority system, a merit system, a system which measures earnings by quantity or quality of production, or a differential based on any bona fide factor other than sex. (b) Any employer who violates subdivision (a) is liable to the employee affected in the amount of the wages, and interest thereon, to which the employee is deprived by reason of the violation, in an additional equal amount as liquidated damages, and in an amount equal to twice the balance of the wages due the employee as a civil penalty. If the employer is determined by a court to have violated subdivision (a) willfully, the civil penalty to which the employee is entitled shall be four times the balance of the wages due. (c) Civil penalties recovered under subdivision (b) shall be distributed to the Labor and Workforce Development Agency for the enforcement of pay equity laws and the education of employees and employers of their rights and responsibilities under pay equity laws. (d) The provisions of this section shall be administered and enforced by the Division of Labor Standards Enforcement. If the division finds that an employer has violated this section, it may supervise the payment of wages and interest found to be due and unpaid to employees under subdivision (a). Acceptance of payment in full made by an employer and approved by the division shall constitute a waiver on the part of the employee of the employee's cause of action under subdivision (i). (e) Every employer shall maintain for a period of at least two years records of the wages and wage rates, job classifications, and other terms and conditions of employment of the persons employed by the employer. The records shall be sufficient to document and support the method, system, calculations, and other bases used to establish, adjust, and determine the wage rates paid to each employee. (f) Every employer of 50 or more employees shall provide to each employee, upon commencement of the employment and at least annually thereafter, a written statement setting forth the employee's job title, wage rate, and an explanation as to how the employee's wages are calculated. The employer shall provide the employee with an updated statement whenever the employee is promoted or reassigned to a different nontemporary position of at least three months' duration. (g) Any employee may file a complaint with the division that the wages paid are less than the wages to which the employee is entitled under subdivision (a). The complaint shall be investigated as provided in subdivision (b) of Section 98.7. The division shall keep confidential the name of any employee who submits a complaint regarding an alleged violation of subdivision (a) until the division establishes the validity of the complaint, unless the division must abridge the confidentiality in order to investigate the complaint. If the employee withdraws the complaint, the division shall continue to keep the employee's name confidential, unless confidentiality of the name has already been abridged. The division shall take all proceedings necessary to enforce the payment of any sums found to be due and unpaid to these employees. (h) The department or division may commence and prosecute, unless otherwise requested by the employee or affected group of employees, a civil action on behalf of the employee and on behalf of a similarly affected group of employees to recover unpaid wages and liquidated damages under subdivision (a), in which the department or division may recover costs of suit. The consent of any employee to the bringing of any action shall constitute a waiver on the part of the employee of the employee's cause of action under subdivision (i) unless the action is dismissed without prejudice by the department or the division, except that the employee may intervene in the suit or may initiate independent action if the suit has not been determined within 180 days from the date of the filing of the complaint. (i) Any employee receiving less than the wage to which the employee is entitled under this section may recover in a civil action the amount of the wages, including interest thereon, to which the employee is deprived, an equal amount as liquidated damages, and an amount equal to twice the balance of the wages due the employee as a civil penalty, together with the costs of the suit and reasonable attorney's fees, notwithstanding any agreement to work for a lesser wage. If the employer is determined by a court to have violated subdivision (a) willfully, the civil penalty shall be four times the balance of the wages due. (j) A civil action to recover wages under subdivision (a) may be commenced no later than two years after the cause of action occurs, except that a cause of action arising out of a willful violation may be commenced no later than three years after the cause of action occurs. (k) If an employee recovers amounts due the employee under subdivision (b), and also files a complaint or brings an action under subdivision (d) of Section 206 of Title 29 of the United States Code which results in an additional recovery under federal law for the same violation, the employee shall return to the employer the amounts recovered under subdivision (b), or the amounts recovered under federal law, whichever is less. SEC. 3. Section 1197.7 is added to the Labor Code, to read: 1197.7. (a) Within 90 days of the effective date of this section, the Secretary of Labor and Workforce Development shall appoint a commission of nine members known as the Equal Pay Commission. (b) The membership of the commission shall be comprised of the following: (1) Two representatives of business in the state, appointed from among individuals nominated by state business organizations and business trade associations. (2) Two representatives of labor organizations, appointed from among individuals nominated by a state labor federation that admits local unions as members and exists primarily to carry on educational, legislative, and coordinating activities. (3) Two representatives selected from organizations that seeks to eliminate pay disparities between men and women and that have undertaken advocative, educational, or legislative initiative in pursuit of this objective. (4) Three individuals, drawn from higher education or research institutions, who have experience and expertise in the collection and analysis of data concerning pay disparities, and whose research has been used to promote the elimination of those disparities. (c) The commission shall make a full and complete study of the following: (1) The extent of wage disparities, in both the public and private sectors, between men and women and between minorities and nonminorities. (2) Those factors that cause, or tend to cause, these disparities, including segregation of men and women, and minorities and nonminorities, across and within occupations, payment of lower wages for occupations traditionally dominated by women and minorities, childrearing responsibilities, and education and training. (3) The consequences of these disparities on the economy and on affected families. (d) The commission shall, no later than one year after its members are appointed, report to the Legislature and to the Secretary of Labor and Workforce Development, the latter of whom shall transmit the commission's report to the Governor. The commission's report shall include the results of its study as well as recommendations for actions, including proposed legislation, to eliminate and prevent disparities in wages between men and women and between minorities and nonminorities. (e) This section shall become inoperative on April 1, 2008, and, as of January 1, 2009, is repealed, unless a later enacted statute, that becomes operative on or before January 1, 2009, deletes or extends the dates on which it becomes inoperative and is repealed.