Can Employers Ask, “So, What Did You Make?”

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A new law in California is squarely aimed at reducing historical wage disparity, particularly between male and female employees.  On January 1, 2018, a new law will take effect in California to prohibit employers from seeking “salary history information, including compensation and benefits, about an applicant for employment.”  The new law, Section 432.3 of the Labor Code, also requires employers to provide the pay scale of the position to the applicant upon reasonable request.

But even under this new law, employers can still access salary history information under certain circumstances.  Employers may review salary history information that is publicly available under federal or state law, including information that is obtainable under the California Public Records Act or the federal Freedom of Information Act.  Employers may also consider and rely on salary history information in determining the salary for that applicant, if the “applicant voluntarily and without prompting discloses salary history information to a prospective employer….”  But, even when employers can rely on voluntarily disclosed salary information to set a particular salary, job applicants are still protected by California’s Equal Pay Act.  Any prior salary information about the applicant still cannot be used as the sole justification for “any disparity in compensation” for employees of different sexes, races, or ethnicities for “substantially similar work.”

It seems likely there will be a challenge to the constitutionality of the new restriction, most likely on free speech grounds.  Other states and municipalities have passed similar laws restricting employers from inquiring about salary history.  Philadelphia has a similar ordinance passed earlier this year to prohibit employers from asking an applicant about prior salaries and from relying on salary information unless that information was voluntarily disclosed by the applicant.  The Chamber of Commerce for Greater Philadelphia filed a lawsuit, challenging the ordinance on several grounds, including “chilling” the protected speech of employers under the First Amendment, and violating the Due Process Clause of the Fourteenth Amendment because of the severe penalties employers risk incurring.  While this case is still pending, the Chamber of Commerce raises questions of constitutionality that could apply as well to California’s new law.

Employment laws change constantly at federal, state and local levels.  In preparation for the new year, employers should review the documents they use in the hiring process, including job applications and new hire documents, and remove questions pertaining to salary history.  Employers should also instruct any employees who may be interviewing applicants not to ask about an applicant’s salary history.  And, for each open position, employers should ensure pay scales are readily available to disclose in response to an applicant’s request.

Conkle, Kremer & Engel attorneys are experienced at helping employers navigate the shifting maze of laws and regulations they face, and resolving employment issues as they arise.

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California Employers’ Risks of PAGA Exposure

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If you’re a California employer, you may have heard people refer to “PAGA” and wondered what it’s all about.  PAGA is a legal device that employees can use to address Labor Code violations in a novel way, in which employee representatives are allowed to act as if they are government enforcement agents.

The California Labor and Workforce Development Agency (CLWDA) has authority to collect civil penalties against employers for Labor Code violations.  Seems simple enough.  But in an effort to relieve an agency with limited resources of the nearly impossible task of pursuing every possible Labor Code violation committed by employers, the California legislature passed the Private Attorney General Act of 2004 (“PAGA”).  PAGA grants aggrieved employees the right to bring a civil action and pursue civil penalties against their employers for Labor Code violations, acting on behalf of the State of California as if they were the CLWDA.  If the aggrieved employees prevail against the employer, the employees can collect 25% of the fines that the state of California would have collected if it had brought the action.

Penalties available for Labor Code violations can be steep – for some violations, the state of California can recover fines of $100 for an initial violation to $200 for subsequent violations, per aggrieved employee, per pay period.  These penalties can add up to serious money, especially if the aggrieved employee was with the company for some time.  But what makes PAGA particularly dangerous for employers is the ability of employees to bring a representative action (similar to a class action), in which they can pursue these penalties for violations of the Labor Code on behalf of not only themselves, but also all others similarly situated.  Under this scheme, an aggrieved employee can bring an action to pursue penalties on behalf of an entire class of current and former employees, thereby multiplying the penalties for which an employer can be on the hook and ballooning the risk of exposure.  That risk is further amplified because PAGA also permits plaintiff employment attorneys to recover their fees if their claim is successful.

There is an upward trend in use of PAGA against California employers.  A July 2017 California Supreme Court decision, Williams v. Superior Court, exacerbated the problem for employers:  The California Supreme Court decided that plaintiff employment attorneys can obtain from employer defendants the names and contact information of potentially affected current and former employees throughout the entire state of California.  This means the PAGA plaintiffs can initiate an action and then pursue discovery of all possible affected employees and former employees throughout California, which can greatly expand the pool of potential claimants and ratchet up the exposure risk for employers.

Employers in California need to be attuned to Labor Code requirements and careful in their manner of dealing with employees, so that they avoid exposure to PAGA liability to the extent possible.  Conkle, Kremer & Engel attorneys are familiar with the latest developments in employment liability and able to assist employers avoid trouble before it starts, or respond and defend themselves if problems have arisen.

 

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