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How to prepare for the California Equal Pay Law

A recent bill has been signed in the state of California will have ramifications on every business both operating in California and abroad. The new law, which will come into effect on the first of January 2016, will change the rules surrounding equal pay from a standard of “equal work” to one of “substantially similar” work. This means that companies now have to legally prove why womEn, on average, earn 26 cents less than the  average dollar made by their male counterparts. Currently, the California Labor code 1197.5 requires that men and women working at the same location receive equal pay for equal work. When the newly enacted amendment comes into effect, men and woman must receive equal pay, regardless of whether they work at the same location.


Here are 5 steps to prepare for the New equal pay law:

  1. It is  imperative that you make sure your policy and compensation guidelines ban any pay discrimination, specifically around gender and ethnicity. Policies must be made clear that employees are only promoted based on merit and good performance.
  2. Make sure you understand what the factors can legally be used to justify inequalities in compensation. This can include past performance reviews, employee education, training and experience. Hierarchy, productivity, and employee merit can also be legally used.
  3. Go over your compensation structure with a fine-tooth comb to make sure that any discrepancies can hold up in a court of law. These factors can be present, however, employers need to be prepared over the next couple of months. Organisations need to be prepared to show that there were legitimate reasons for difference in wages, and, if necessary,  have lawyers oversee the process.
  4. Outline guidelines and training for those managers who are undertaking salary negotiations, so that they are fully prepared for any legal obligations and what factors are legal.
  5. If employees wish to discuss their compensation, you are now obliged to be open and transparent about their salaries and their co-workers salaries. If the need arises, provide documentation to support your compensation disparities.

This law will come into effect on the first of January 2016, so it gives your organisation  to prepare. However, you are legally obliged to create equal compensation from the beginning of next year. If you need to do performance reviews on your employees click here.