Update to CA Salary History Ban and Equal Pay Act
On January 1st, 2018, California put into place Labor Code Section 432.3, commonly referred to as California’s salary history ban. As we have shared with you in previous Bulletins, this new Labor Code section did two things. The first was to prohibit employers from asking about (or relying upon) an applicant’s historical salary information to determine if an offer of employment should be extended or how much the applicant should be paid. The second was to require employers to provide a “pay scale” for the position being applied for upon “reasonable request” by the applicant. The issue with the initial language was that a number of these terms, particularly “applicant”, “pay scale”, and what constitutes a “reasonable” request, were not defined in the legislation.
On July 18th, 2018, AB 2282 was approved by Governor Brown to try to resolve these issues by amending both 432.3 and Labor Code 1197.5, a section of the labor code put into place by the California Equal Pay Act prohibiting wage discrimination based on gender.
The changes to 432.3 were relatively minor and better define the unclear terms above. AB 2282 clarifies that, “pay scale” now refers to a salary or hourly wage range for the position sought. A “reasonable request” is defined as a request by an applicant who has completed an initial interview with the employer, providing a way for employers to not have to respond to every request for pay information. Also, it is now clear that an “applicant” or “applicant for employment”, is an individual who is seeking employment with the employer and is not currently working for that employer in any way.
AB 2282 also added language which reads “Nothing in this section shall prohibit an employer from asking an applicant about his or her salary expectations for the position being applied for” which should serve to alleviate concern some employers had expressed about asking applicants any questions related to compensation.
AB 2282 changed 1197.5(a4) to read “Prior salary shall not justify any disparity in compensation. Nothing in this section shall be interpreted to mean that an employer may not make a compensation decision based on a current employee’s existing salary, so long as any wage differential resulting from that compensation decision is justified by one or more of the factors listed in this subdivision.” This revision allows employers to make compensation decisions based on the employee’s current, but not past salary, as long as the decision is justified by factors such as a seniority or merit system, a system that measures earnings by quantity or quality of production. Bona fide factors such as education, training, or experience can also be used so long it is not based on or derived from a sex-based differential in compensation, is job related to the position in question, and consistent with a business necessity.
Matt Marovich – HR Consultant
Disclaimer: Some information contained herein has been abridged from numerous sources and may be protected by various copyright laws. Such information should not be construed as consulting or legal advice. Please contact our office for specific advice and/or referrals
Manage Claims to Reduce Unemployment Costs
Unemployment Insurance (UI) costs can be shrouded in mystery but there are some steps employers can take to understand and manage liability and expenses in this area. A business’ unemployment claims experience factors into the rate an employer is assigned, which is then applied to payrolls. There are other factors impacting this rate that an employer cannot control (shared with all employers, such as the overall balance of the greater UI fund).
Each year, usually in December, employers receive a notice from their state about the rate that will be charged the following year. Remember to forward this notice to your payroll provider. In addition to the rate announcement, this notice includes information about the calculation of the employer’s unemployment claims experience. Although it’s tough to assign a specific dollar impact of a single claim, an employer who was interested could drill in to this, look back and calculate if they hadn’t had x volume claim against their account then they might have fallen into a lower rate.
The State of California provides information about what goes into its calculation (See Employer Contribution Factors on page A4.) “Contributions paid by an employer based on a contribution rate derived from the Experience Rating System. This system determines each individual employer’s contribution rate based on the employer’s employment experience and the condition of the UI Fund. New employers are required to pay a rate of 3.4 percent for up to three years.”
What can an employer control? There are going to be some unemployment claims that can’t be avoided (layoffs, and many performance-related terminations) and others in which an employer has good standing to contest (resignations, or terminations for cause such as misconduct or violations of company policy). When contesting an employee’s claim, the timeliness and completeness of the employer’s responses is of utmost importance. Typically, there is a very short window for the employer to reply to a claim and provide the company’s side of the story. In your initial response to the agency, include as much documentation as you can of violation of company policy or evidence of misconduct, according to the situation.
After an initial finding of eligibility, there is an opportunity to appeal, which may involve a hearing. Unemployment hearings are a final opportunity to have the claim reviewed. The hearing officer will listen to both the employee and employer’s side, so be prepared and arrive early. This is a good moment to “take the high road” and be cordial with the former employee. Leave any unresolved resentment at the door; it may work against you if it’s perceived by the person making the eligibility determination. Both sides will be notified in writing of the decision at a later date.
Unemployment Insurance and claims are part of doing business, and it’s important to remember that this benefit offers an important financial safety net for those who have legitimate claims. Through careful preparation and response to certain claims, employers can leverage opportunities to mitigate this expense.
Amy Kelemen, SPHR – Sr. HR Consultant, Director of Professional Services
Disclaimer: Some information contained herein has been abridged from numerous sources and may be protected by various copyright laws. Such information should not be construed as consulting or legal advice. Please contact our office for specific advice and/or referrals.