CFPA’s Anticipated Effect on Litigation

In our Winter 2015 E-Newsletter, we discussed the California Fair Pay Act (“CFPA”), which became effective January 1 of this year.  That article summarized the CFPA and how it amends section 1197.5 of the California Labor Code.  Section 1197.5, which was enacted in 1949, prohibits employers from paying employees  “less than employees of the opposite sex in the same establishment for equal work on jobs the performance of which requires equal skill, effort, and responsibility, and which are performed under similar working conditions.”  In this article we discuss the CFPA’s anticipated effect on litigation.

During the sixty-plus years following the enactment of section 1197.5, there has been surprisingly little case authority discussing the rights of employees and obligations of employers under that statute.  One possible reason for this is that aggrieved parties typically sue under the federal Equal Pay Act, Title VII, or the California Fair Employment and Housing Act, all of which  afford similar rights to employees seeking to recover for alleged gender-based discrimination in compensation.[1]  However, the CFPA could become a more popular statute for gender wage discrimination plaintiffs because it, in many ways, makes it easier for them to prove their case.  This is because the CFPA reduces the evidentiary burden on employees seeking to recover for alleged gender-based wage discrimination, and increases the burden on employers attempting to defend against such claims.

The enumerated defenses under the CFPA, which were discussed at length in our last article, likely will become fertile ground for litigation, because each defense must be applied “reasonably” in order to succeed, and each such defense relied on “must account for the entire wage differential.”  Even where an employer can establish that the wage disparity is “reasonably” attributed to factors other than sex, such as training, education, or experience, the CFPA requires the factors,  to not be  based on or derived from a sex-based differential in compensation, and that each factor be “job related,” and justified by “an overriding legitimate business purpose such that the factor … effectively fulfills the [asserted] business purpose.”  So, when adjudicating claims under the CFPA, the courts will probably not be so quick to recognize defenses that have been successfully raised in federal EPA cases wherein employers relied on prior salary and experience when setting compensation for new employees.[2]

One question that undoubtedly needs to be resolved is whether the CFPA provision prohibiting employers from retaliating against employees who discuss their wages with other employees can be legally enforced without interfering with the exclusive jurisdiction of the National Labor Relations Board (“NLRB”).  The NLRB is  the federal agency charged with administering and enforcing federal labor policy under the National Labor Relations Act (“NLRA”).  Under the NLRA, employees have the right to form, join or assist unions, to organize for purposes of collective bargaining, and to engage in other “concerted activities for mutual aid and protection.”[3]  The rights conferred under the NLRA include the right for employees to discuss the subject of wages in the workplace; therefore, an employer who interferes with that right commits an unfair labor practice under the NLRA.[4]

Years ago, the U.S. Supreme Court ruled that when an activity is arguably subject to protection under the NLRA, or  is prohibited under the NLRA, “the states as well as the federal courts must defer to the exclusive competence of the [NLRB] if the danger of state interference with National labor policy is to be averted.”[5]  This ruling, which has become known as the “Garmon Preemption” doctrine, essentially requires that state courts refrain from adjudicating cases where the underlying claims would constitute an unfair labor practice under the NLRA.[6]  Here, it would appear that the portion of the CFPA that prohibits employers from retaliating against employees who discuss wages falls squarely within the Garmon Preemption doctrine.  It remains to be seen whether this portion of the CFPA ultimately will be deemed unenforceable, at least in cases where the affected employees are covered under the NLRA.[7]

 Jonathan Turner is a partner in the Los Angeles office of Mitchell Silberberg & Knupp LLP. A significant portion of his practice is in the motion picture industry, where he has represented studios and other employers in labor arbitrations, administrative proceedings, court litigation, union avoidance issues, and collective bargaining negotiations. For more info about Jonathan, click here.

[1] Green v. Par Pools, Inc. (2003) 111 Cal.App.4th 620, 623.
[2] See for example Irby v. Bittick, 44 F.3d 949, 955-956 (11th Cir. 1995) (employer relied on the “any factor other than sex” defense – court held that an EPA defendant may successfully raise this affirmative defense if he proves that he relied on prior salary and experience in setting a new employee’s salary); Kouba v. Allstate Insurance Co., 691 F.2d 873, 876 (9th Cir. 1982) (defendant set compensation of new insurance agents on basis of ability, experience and salary.  Court held that a factor used to effectuate some non-gender based business policy is not prohibited under the EPA “simply because a wage differential results” between the sexes); Stanley v. University of Southern California, 178 F.3d 1069 (9th Cir. 1999) (court agreed with EEOC that superior experience, education, and ability may justify pay disparities if distinctions based on these criteria are not gender based).
[3] 29 U.S.C. section 157.
[4] Grant-Burton v. Covenant Care, Inc. (2002) 99 Cal.App.4th 1361, 1372-1373.
[5] See The Retail Property Trust v. United Brotherhood of Carpenters and Joiners of America, 768 F.3d 938, 951-952 (9th Cir. 2014), quoting San Diego Building Trades Council v. J.S. Garmon, 359 U.S. 236, at 295 (1959).
[6]   See Walmart Stores, Inc., et al., v. UFCW, et. Al. (2016) 2016 Cal. App. LEXIS 530.
[7] The Supreme Court recognized a “local interest” exception to preemption under Garmon.  The local interest exception applies where the conduct sought to be regulated by the state is only of “peripheral concern of the [NLRA],” or “touches on interests so deeply rooted in local feeling and responsibility[.]”  See Sears, Roebuck & Co. v. Carpenters (1978) 436 U.S. 180.  The conduct in question in this article – the sharing of wage information among employees – is the type of conduct that clearly is protected under the NLRA, and likely would be considered to be of only peripheral concern of the NLRA, and not touch on interests that are deeply rooted in local feeling and responsibility.  The cases where the local interest exception commonly arises involve attempts to enforce state laws regulating violence, breach of peace, trespass and other unlawful conduct occurring in the course of a labor dispute or controversy.  See discussion in Walmart Stores, Inc. v. UFCW, supra.

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