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Justify the gender pay gap, California orders firms

Should companies have to prove why men are paid more than women for a similar job?

by Adam Gale
Last Updated: 11 May 2016

How do you close the gender pay gap? The British are trying wage transparency, the Scandinavians have their boardroom quotas and the Japanese are paying financial incentives to promote women to senior roles (well, they would if anyone was taking them up on it). Now the US state of California has come up with a new, distinctly American method: the threat of litigation.

State governor Jerry Brown signed the California Fair Pay Act into law yesterday, arguably giving America’s most populous state its most stringent wage equality laws. The act, which comes into force in the New Year, will force a company accused of wage discrimination to prove in court that there is a good reason other than the employee’s gender for discrepancies in pay.

The Fair Pay Act goes further than older rules ensuring men and women are paid the same to do the same job, by applying that principle to ‘substantially similar work’, the exact interpretation of which will become clear once the matter gets debated in the courts.

It will be interesting to see the impact of the new legislation on California’s 16% full-time gender pay gap. There are other factors, such as the relative deficit of women historically considered for promotion and the career impact of parental leave, that won’t be affected by the new law, after all.

Would such a litigious solution work here? It may have a positive effect on pay inequality, though many (one would hope most) employers would say they pay people fairly for what they do anyway.

On the other hand, few businesses (other than lawyers, of course) would welcome the prospect of having to fight scores of court battles to justify their remuneration policies, or having courts define the monetary value of different jobs for them.

They may not have a choice, of course. If such a law works in California, it could well end up being copied by legislators across the US and on this side of the pond, giving firms a good reason (if they needed another one) to clean up their acts before they find themselves in court


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