BILL ANALYSIS Ó SB 1063 Page 1 SENATE THIRD READING SB 1063 (Hall) As Amended August 19, 2016 Majority vote SENATE VOTE: 26-13 -------------------------------------------------------------------- |Committee |Votes|Ayes |Noes | | | | | | | | | | | | | | | | |----------------+-----+-----------------------+---------------------| |Labor |5-1 |Roger Hernández, Chu, |Patterson | | | |McCarty, O'Donnell, | | | | |Thurmond | | | | | | | |----------------+-----+-----------------------+---------------------| |Appropriations |14-5 |Gonzalez, Bloom, |Bigelow, Gallagher, | | | |Bonilla, Bonta, |Jones, Obernolte, | | | |Calderon, Daly, |Wagner | | | |Eggman, Eduardo | | | | |Garcia, Holden, Quirk, | | | | |Santiago, Weber, Wood, | | | | |McCarty | | | | | | | | | | | | -------------------------------------------------------------------- SB 1063 Page 2 SUMMARY: Expands the prohibitions laid down in the California Equal Pay Act regarding gender, to include discrimination based on race or ethnicity. Specifically, this bill: 1)Prohibits an employer from paying any of its employees at wage rates less than the rates paid to employees of another race or ethnicity for substantially similar work, when viewed as a composite of skill, effort, and responsibility, and performed under similar working conditions. 2)Provides exceptions for when the employer demonstrates the wage differential is based upon one or more of the following factors, each factor relied upon is applied reasonably and the one or more factors relied upon account for the entire wage differential: a) A seniority system b) A merit system c) A system that measures earnings by quantity or quality of production d) A bona fide factor other than race or ethnicity, such as education, training, or experience. This factor shall apply only if the employer demonstrates that the factor is not based on or derived from a race- or ethnicity-based differential in compensation, is job related with respect to the position in question, and is consistent with a business necessity. e) For purposes of these provisions, "business necessity" means an overriding legitimate business purpose such that the factor relied upon effectively fulfills the business SB 1063 Page 3 purpose it is supposed to serve. This shall not apply if the employee demonstrates that an alternative business practice exists that would serve the same business purpose without producing the wage differential. 3)Provides technical changes to address chaptering concerns with AB 1676 (Campos) of the current legislative session. EXISTING LAW: 1)Prohibits an employer from paying any of its employees at wage rates less than the rates paid to employees of the opposite sex for substantially similar work, when viewed as a composite of skill, effort, and responsibility, and performed under similar working conditions, unless the employer demonstrates that specific, reasonably applied factors account for the entire wage differential. 2)Authorizes an employee paid lesser wages in violation of this prohibition to file a complaint with the Division of Labor Standards Enforcement, and authorizes the employee, the division, or the Department of Industrial Relations to commence a civil action for the wages the employee was deprived of because of the violation, interest on those wages, and liquidated damages. 3)Provides that an employer or other person who violates or causes a violation of that prohibition, or who reduces the wages of any employee in order to comply with that prohibition, is guilty of a misdemeanor. SB 1063 Page 4 FISCAL EFFECT: According to the Assembly Appropriations Committee, unknown, likely significant costs to the Department of Industrial Relations (DIR) to process claims associated with wage discrimination based on race or ethnicity. The Division of Labor Standards and Enforcement (DLSE) does not currently receive any pay discrimination claims on the basis of race or ethnicity, making it difficult to predict costs associated with this bill. DIR notes, however, that the Department of Fair Employment and Housing (DFEH) received roughly 6,500 claims in 2014 alleging employment discrimination based on race. As a point of comparison, if DLSE received 1% of the claims DFEH received, this would generate workload for DLSE of approximately $600,000 (special fund) in the first year and $570,000 (special fund) in subsequent years. COMMENTS: The author believes that the Equal Pay Act, in its current form, fails to address that wage discrimination is not confined to gender. Women of color, who are paid less than white women, should be able to make a claim under California's Equal Pay Act. Men of color, who are paid less than white men, should be able to make a claim under California's Equal Pay Act as well. Supporters argue, "A 2013 study revealed that Asian American women make 90 cents; African American women make 64 cents, and Hispanic or Latina women make just 54 cents for every dollar that a Caucasian man earns. The wage gap isn't only between men and women, as African American men earn just 75% of the average salary of a Caucasian male worker. This bill builds upon the important steps California has taken to address wage inequality and will set a national standard to ensure that every worker is paid a fair and equitable wage." Opponents state, "SB 358 (Jackson), [Chapter 546, Statutes of 2015], which expanded and strengthened the law regarding equal SB 1063 Page 5 pay for women, just went into effect at the beginning of this year. The Legislature should allow time for employees, employers, and the courts to interpret and implement the new boundaries of the equal pay law before seeking to amend and expand it." Analysis Prepared by: Taylor Jackson / L. & E. / (916) 319-2091 FN: 0004730