To lessen risk, all businesses should consider developing strategies and goals for setting compensation to ensure compliance with pay parity laws. ... Employers affected by the minimum wage increases should ensure that their notices are up to date and confirm with their payroll provider that the increases will take effect on July 1.

Summer is here—bringing changes in wage and hour laws throughout California. Beginning July 1, 2018, minimum wage increases for businesses with employees in San Francisco, the City and County of Los Angeles, Belmont, Emeryville, Malibu, Milpitas, Pasadena, San Leandro and Santa Monica. That same day, San Francisco’s Parity in Pay Ordinance also takes effect.

San Francisco’s Parity in Pay Ordinance

Employers with workers in San Francisco are reminded to use caution in hiring. As previously reported, San Francisco’s Parity in Pay Ordinance prohibits employers, including city contractors and subcontractors, from asking applicants and employees about current or past salary. The new law also prohibits employers from disclosing the salary history of any current or former employee without written consent, and from considering the salary of an applicant during negotiations. The ordinance equally prohibits employer retaliation against an applicant who refuses to disclose salary history information.

The ordinance does not completely bar an employer from obtaining salary history information. As with California’s statewide salary history ban, if applicants choose to voluntarily share their salary history without prompting, the employer may consider that information in determining what salary to offer to those applicants. However, the ordinance makes clear that salary history on its own may not be used to justify a pay discrepancy between employees of a different sex, race or ethnicity who perform substantially similar work at the company. The San Francisco ordinance is in harmony with California’s Fair Pay Act, which prohibits salary history as the lone justification for certain pay discrepancies.

Scope of Coverage

The ordinance applies to all employers and their agents (such as recruiters) that are required to register to do business in San Francisco. Applications solicited, accepted, processed or reviewed in San Francisco with the work to be performed within the city’s geographic boundaries are covered. Employers need not worry about current employees seeking another position as the ordinance excludes those applicants from the ban.

Notice Requirements

Employers must post a notice of the rights afforded under the ordinance in a location that is easily visible to all covered persons. Any labor union representing covered employees must also receive a copy of the notice. The notice must be made available in English, Spanish, Chinese and any other language spoken by at least 5 percent of the workforce at the jobsite or workplace.

Penalties and Enforcement

For the first year the ordinance is in effect, employers who violate the law will be subject to a warning from the San Francisco Office of Labor Standards Enforcement (OLSE) and a notice to rectify violation of the ordinance. Penalties worsen beginning July 1, 2019, when the OLSE may initiate civil action through the city attorney and impose administrative penalties on noncompliant employers. Applicants and employees in San Francisco can also file complaints.

California Cities and Counties Increase Minimum Wage Rates

Minimum wage rates in several California jurisdictions also increase this summer. On July 1, 2018, the following local minimum wage increases take effect:

• Belmont: $12.50/hour
• Emeryville: $15.69/hour for businesses with 56 or more employees; $15/hour for businesses with 55 or fewer employees
• City of Los Angeles: $13.25/hour for employers with 26 or more employees; $12/hour for employers with 25 or fewer employees
• County of Los Angeles (unincorporated areas only): $13.25/hour for employers with 26 or more employees; $12/hour for employers with 25 or fewer employees
• Malibu: $13.25/hour for employers with 26 or more employees; $12/hour for employers with 25 or fewer employees
• Milpitas: $13.50/hour
• Pasadena: $13.25/hour for employers with 26 or more employees; $12/hour for employers with 25 or fewer employees
• San Francisco: $15/hour
• San Leandro: $13/hour
• Santa Monica: $13.25/hour for employers with 26 or more employees; $12/hour for employers with 25 or fewer employees

What This Means for Employers

San Francisco employers are encouraged to review forms, policies and practices relating to hiring and compensation to ensure compliance with the Parity in Pay Ordinance. To lessen risk, all businesses should consider developing strategies and goals for setting compensation to ensure compliance with pay parity laws. Consider a privileged pay equity audit as part of this process, in which findings on compensation are protected under attorney-client privilege. 

Employers affected by the minimum wage increases should ensure that their notices are up to date and confirm with their payroll provider that the increases will take effect on July 1, 2018.

For Further Information

If you have any questions about this Alert, please contact any of the attorneys in our Employment, Labor, Benefits and Immigration Practice Group or the attorney in the firm with whom you are in regular contact.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.