California Pay Equity: Law, Audits, and Compliance

Overview

This episode provides a comprehensive examination of pay equity audits and transparency laws that are fundamentally changing how companies handle compensation. The discussion covers the persistent wage gap in California, sophisticated statistical tools like regression analysis for measuring pay equity, critical pitfalls and limitations of data models, California's Equal Pay Act evolution, pay transparency requirements under SB 1162, multi-state compliance challenges, and strategic approaches to conducting pay equity audits while protecting legal privilege.

Learning Objectives

After completing this episode, participants will be able to:

1. Analyze the persistent wage gap including California statistics (women earn 81 cents per dollar), racial disparities, and the division between structural (60%) and psychological (40%) factors
2. Apply multiple regression analysis as the gold standard for pay equity measurement including predictor variables, statistical significance thresholds, and coefficient interpretation
3. Identify critical pitfalls including omitted variable bias, data quality challenges, proxy risks, and the necessity of sensitivity testing
4. Navigate California Equal Pay Act evolution from SB 358 including substantially similar work standard across skill, effort, responsibility, and working conditions
5. Implement the four affirmative defenses (seniority, merit, production, BFOTOS) while understanding business necessity requirements and prior salary prohibitions
6. Comply with pay transparency laws under SB 1162 including baseline requirements, job posting mandates (15+ employees), and pay data reporting (100+ employees)
7. Manage multi-state compliance challenges where single remote employee can trigger comprehensive California requirements effectively setting de facto national standards
8. Conduct strategic pay equity audits across three types (foundational, remedial, causal) while protecting findings through attorney-client privilege protocols

Key Takeaways

1. Gap widens with level: 98 cents in service work vs. 70 cents in corporate management/finance

1. Childhood influences early: Boys paid $13.80 vs. girls $6.71 for weekly chores establishing value divergence

1. Regression is gold standard: Multiple regression simultaneously controls for legitimate pay differences

1. Omitted variable danger: Missing factors wrongly attributed to protected characteristics inflating disparities

1. Proxy risks real: Age at hire as proxy for experience can bake in gender bias from caregiving

1. Substantially similar broader: Composite view of skill, effort, responsibility replaces narrow equal work

1. Burden shifted: Employer must prove entire pay difference justified through affirmative defenses

1. BFOTOS strict: Must be not sex-based, job-related, and serve business necessity with no alternative

1. Prior salary banned: Cannot ask about salary history since January 2018

1. SB 1162 comprehensive: Pay scale disclosure (all), job posting requirements (15+), CRD reporting (100+)

1. Mean vs median matters: Both required to identify distribution patterns and disproportionate high earners

1. Single employee trigger: Texas company with one California remote worker triggers full compliance

1. De facto national standard: California/Colorado setting standards due to highest standard strategy

1. Three audit types: Foundational (risk assessment), remedial (gap fixing), causal (root causes)

1. Privilege protection critical: Attorney direction, strict protocols, privileged markings essential for protection