State of California OT Laws (Continued)
4. Can my employer pay men and women different salaries?
The California Equal Pay Act requires equal pay for employees who perform “substantially similar work, when viewed as a composite of skill, effort, and responsibility, and performed under similar working conditions.”20
The Fair Pay Act and Equal Pay Act are intended to reduce the disparity in how men and women are compensated for performing similar jobs. An employer cannot pay men and women different salaries for similar work, except where the employer can demonstrate the wage differential is based on one or more of the following factors:
A seniority system.
A merit system.
A system that measures earnings by quantity or quality of production.
A bona fide factor other than sex, such as education, training, or experience.21
The employer has to demonstrate that the bona fide factor is not based on or derived from a sex-based differential in compensation, is job-related with respect to the position in question, and is consistent with a business necessity. A “business necessity” is “an overriding legitimate business purpose such that the factor relied upon effectively fulfills the business purpose it is supposed to serve.”22
Even if the employer demonstrates that a bona fide factor other than sex was used to differentiate compensation, the defense does not apply if the employee demonstrates that an alternative business practice exists that would serve the same business purpose without the wage inequality.23
The Fair Pay Act provides similar protections to employees of another race or ethnicity.24
Employers who violate the Equal Pay Act are liable to employees for unpaid wages and interest. In addition, the employee may be able to recover an additional equal amount as liquidated damages.25
5. Can my employer reduce my salary?
In general, your employer can reduce your salary for any lawful reason. There is no specific California labor law which prohibits an employer from reducing an employee's compensation. However, your employer cannot reduce your salary to a rate below the minimum wage.
An employer can reduce a non-exempt employee's salary as long as the employee is compensated at no less than the California minimum wage. In addition, the employer must compensate the employee for any overtime at no less than one and one-half (1 ½) times the minimum hourly wage.26
Example: Megan is a non-exempt employee working at a bar with 10 total employees. In June of 2019, Megan's employer compensates Megan based on a 40-hour workweek at $1,000 per week, or $25.00/hour.
In July of 2019, Megan's employer says her salary will be reduced because there has been a drop in sales. Megan's next paycheck is only $800 per week for working the same 40 hours she worked the previous week. Megan may not have a claim against the employer because the employer is compensating Megan at $20.00/hour, which is higher than the California minimum wage at the time of $11.00 per hour for smaller businesses.
However, an employer cannot lower an employee's salary for an unlawful reason, or in retaliation for protected actions.
The Equal Pay Act protects employees who ask about another employee's wages or disclose their own wage or salary. An employer shall not discriminate against an employee for disclosing the employee's own wages, discussing the wages of others, or encouraging other employees to exercise their equal pay rights.27
Example: After Megan had her salary reduced, she speaks to her co-worker, Joe, a male, who does substantially the same job. Megan asks Joe if his salary was reduced. Joe tells Megan he is making $1,200 a week for working 40-hours, doing the same type of job.
Megan speaks to her employer about her reduction in salary while her co-worker was being paid substantially more money. Megan's employer tells Megan her salary will further be reduced to $700 per week because she was asking other employees about their salaries, which is none of her business.
Megan's employer cannot retaliate against Megan by reducing her salary because inquiring about salary is protected by the Equal Pay Act in California. Additionally, Megan may have a claim against her employer for violating the Equal Pay Act by paying male employees at a higher rate than female employees for performing substantially similar work.28