Federal and State Laws Prohibit Sex-Based Pay Discrimination in the Workplace
Federal Prohibition of Wage Discrimination Based on Sex
The Equal Pay Act of 1963 says the following:
No employer shall discriminate within any establishment between employees based on sex by paying wages at a rate less than what is paid in such establishment to the opposite sex for equal work on jobs, the performance of which requires equal skill, effort, and responsibility, and which are performed under similar working conditions, except where such payment is made pursuant to the following:
- A seniority system.
- A merit system.
- A system measuring earnings by quality or quantity of production.
- A pay differential based on any factor other than sex.
Source: Title 29 United States Code section 206(d).
Congress has passed various laws to protect employees from discrimination based on their sex. For example, Congress passed the Equal Pay Act of 1963 (Federal Pay Act), which prohibits sex-based wage discrimination among employees.2 The Federal Pay Act generally mandates that, except under certain conditions, employers provide their employees with equal pay for equal work in classifications that require equal skill, effort, and responsibility, and that are performed under similar working conditions. These provisions have been interpreted via federal regulations to mean that the jobs need not be identical, but they must be substantially similar. Job content (not job titles) determines whether classifications are substantially similar. Nevertheless, pay disparities among employees performing similar work are still allowable under the Federal Pay Act, as long as the difference is not based on sex as noted in the text box. The federal law applies equally to both men and women and generally applies to all employees—including administrative, professional, and executive employees. All forms of payment are covered under this law, including salary, overtime pay, bonuses, reimbursement for travel expenses, and benefits, among others.
In addition to the Federal Pay Act’s equal pay and compensation requirements, Title VII of the Civil Rights Act of 1964 (Title VII), as amended, prohibits all employment discrimination based on an individual’s race, color, religion, national origin, or sex. The law also makes it illegal for an employer to discriminate against an employee because he or she opposed an unlawful employment practice, filed a charge of discrimination, or participated in an investigation, proceeding, or hearing pertaining to discrimination. In addition, this law also prohibits employers from using selection procedures that have the effect of disproportionately excluding persons based on race, color, religion, sex, or national origin, where the tests or selection procedures are not job-related and consistent with a business necessity.
Some Distinguishing Provisions of the California Equal Pay Act
The California Equal Pay Act includes requirements that employers do the following:
- Demonstrate affirmatively that wage differentials are based upon bona fide factors other than sex.
- Demonstrate that each factor relied upon for a wage differential is applied reasonably, that the sum of the factors accounts for the entire wage differential, and that the differential is consistent with a business necessity.
- Do not discharge, discriminate, or retaliate against an employee for disclosing the employee’s own wages, discussing the wages of others, or inquiring about another employee’s wages.
Source: California Labor Code, Section 1197.5.
Since 1949 California has had its own laws aimed at protecting employees in the workplace against wage discrimination based on sex. The California Equal Pay Act (California Pay Act), most recently amended in October 2015, requires equal pay for substantially similar work when viewed as a composite of skill, effort, and responsibility, unless the employer can demonstrate that differences in pay are job-related and based on factors other than sex. The California Pay Act expands beyond the express requirements found in the Federal Pay Act in certain areas, and we highlighted some of those key provisions in the text box.
Although California law does not expressly require employers to monitor employee wages and to identify disparities, the potential financial penalties for employers found in violation of the California Pay Act can be significant. If an employee is successful in a civil action, the employer could be expected to pay the amount of lost wages owed to the employee as well as additional damages and attorney’s fees.
Studies Have Identified Gender-Based Pay Differences Across Occupations, but No Clear Consensus Exists About the Size of the Problem or Its Causes
According to various studies and reports, women in the labor force have historically received less pay than men.3 The U.S. Census Bureau (Census Bureau), in its September 2013 report titled Income, Poverty, and Health Insurance Coverage in the United States: 2012, states that women earned less than 59 cents for every dollar earned by a man in 1963, the same year Congress passed the Federal Pay Act. However, almost 50 years later, the Census Bureau’s 2012 data suggest that the wage gap has persisted, albeit to a lesser degree, with women earning less than 77 cents for every dollar earned by a man, a situation causing a roughly 23-cent pay gap. Despite the gains made, progress toward further closing the pay gap has stalled in recent years. According to the Census Bureau, women consistently earned about 76 cents on the dollar between 2001 and 2012. Figure 1 illustrates the limited progress that has been achieved at further closing the wage gap in recent years.
The Gap Between Male Employees’ Pay and Female Employees’ Pay in the U.S. From 1960 to 2012
Source: U.S Census Bureau, Income, Poverty, and Health Insurance Coverage in the United States: 2012.
Despite the stark contrast between women’s earning on average 23 percent less than the amounts men earn, the magnitude of the problem and the degree of impact resulting from the wage gap’s numerous potential causes remain undefined. Some researchers have examined the pay gap and concluded that a significant portion of it can likely be explained by employee choice and behavior, such as an individual’s deciding how best to balance work, personal, and family commitments. For example, an individual’s choices about what to study in school, what profession to pursue, and whether to temporarily leave the workforce to care for children or other family members can influence that individual’s pay. Nevertheless, according to a 2009 study by the CONSAD Research Corporation for the U.S. Department of Labor, “It has not been possible to develop reliable estimates of the total percentage of the raw wage gap for which all of the factors that have been separately found to contribute to the gap collectively account.” Although CONSAD estimated that between 4.8 percent and 7.1 percent of the raw wage gap is unexplained, it commented that it is not possible to determine reliably whether any portion of the observed gender-based wage gap can be attributed confidently to overt discrimination against women. At a practical level, CONSAD commented that “the complex combination of factors that collectively determine wages paid to different individuals makes the formulation of policy that will reliably redress overt discrimination that does exist a task that is, at least, daunting and, more likely, unachievable.” In another report prepared by the American Association of University Women (AAUW) in October 2012, the findings indicate that many factors play a role in the wage gap and that even after controlling for factors such as college majors chosen, numbers of hours worked, and employment sectors, the pay gap shrinks but it does not disappear. The AAUW’s report says that about one-third of the pay gap cannot be explained by any of the factors commonly understood to affect earnings, thus indicating that other factors more difficult to identify—and likely more difficult to measure—contribute to the pay gap.4
Obtaining better information to understand the pay gap and its causes has been a focus at the federal level; however, no apparent consensus exists about the types of data that researchers should collect. According to an April 2012 White House report that describes the accomplishments of its equal pay task force, the U.S. Equal Employment Opportunity Commission (EEOC) initiated a study by the National Academy of Sciences to determine the types of pay data that should be collected to enhance the monitoring and enforcement of wage discrimination laws. The results of this study were made public in 2012. The study concluded that without a clearly articulated vision from federal agencies for how employers could use wage data, the benefits of obtaining additional wage information from employers are uncertain, and the process creates a significant administrative burden on the EEOC and potentially increases the reporting burden on employers. Further, legislative efforts that have stalled in Congress, such as the so-called Paycheck Fairness Act, have also contained provisions for the EEOC and Department of Labor to perform more training and research on pay equity and to survey data currently collected by the federal government that could be used to aid in better monitoring pay equity issues. However, this legislation does not specify the particular types of data necessary for better monitoring.
The Four Counties We Visited Are Required to Adhere to Merit System Principles When Hiring and Establishing the Salaries for Certain Types of Employees
The four counties we visited—Fresno, Los Angeles, Orange, and Santa Clara—generally had two types of employees: classified employees, those appointed to positions covered by the counties’ merit system rules, and unclassified employees, those appointed to positions that may fall under such rules but for which the rules are not required. Merit system rules are personnel standards that describe how the county will recruit, select, and compensate employees for positions that have permanent status.5 Merit system rules are founded on the idea that permanent and career service employees are to be recruited, selected, and promoted based on their relative abilities, knowledge, and skills as opposed to other factors, such as their personal relationships or political connections. Such employees also typically enjoy certain rights to appeal—through an impartial process—their employers’ decisions when the employees are subject to discipline or other adverse employment actions, such as termination. The Government Code and federal law require all counties participating in certain state-funded or federally funded programs, such as the Social Security Act and the Federal Civil Defense Act, to adopt merit-based personnel systems in accordance with the regulatory guidance issued by the California Department of Human Resources (CalHR). CalHR arranges for periodic reviews of each county’s compliance with these regulations.
Classified employees are commonly the permanent, career employees of each county and make up a significant part of a county’s workforce. For example, according to Santa Clara County, nearly 90 percent of its workers are classified employees. In contrast, counties may exempt unclassified employees—those who lack permanent career status, including those appointed to temporary positions or to such executive-level leadership positions as department heads—from the same standards and protections afforded to classified employees. Our audit focused on two aspects of each county’s merit-based rules, namely its hiring and selection process and its salary-setting process for employees covered by these rules. CalHR’s regulations list different “merit principles” associated with these two types of decisions. For selection and recruitment, regulations generally require that recruitment efforts be planned and carried out in a manner that assures equal employment opportunity and open competition for an applicant’s initial civil service appointment. Basic recruitment efforts for career entry must include the posting of examination announcements, and the candidate selection procedures must be job-related and must maximize validity, reliability, and objectivity as much as possible. According to regulations, when hiring (or otherwise appointing) an individual for a permanent career service position, counties must select from an appropriately ranked eligibility list, choosing from either the top 10 eligible individuals or from a top-scoring group of individuals who are willing to accept the conditions of employment. Figure 2 provides an overview of a hypothetical county’s hiring process based on merit system rules and principles.
A County’s Recruitment and Selection Process for Classified Positions
Source: California State Auditor’s analysis of Fresno, Los Angeles, Orange, and Santa Clara counties’ policies and procedures related to hiring and promotions for classified positions.
* In Los Angeles County, certain county departments handle their own recruitment, selection, and hiring process.
In contrast, counties may follow—but are not required to follow—such prescriptive rules when recruiting, selecting, and hiring for an unclassified position, or an appointed position not covered by the county’s merit system rules. In such cases, the individual or county body that appoints an employee to an unclassified position need only determine that the individual meets the requirements for the job and that the employee thereafter serves at the pleasure of that appointing authority. For example, in Santa Clara County’s merit system rules, county appointments of individuals to unclassified positions can be exempt from rules dictating how the county is to advertise and administer hiring exams.
Our audit also examined the salary-setting process for the four counties we visited, and it reviewed CalHR’s regulations, which similarly establish a merit-based principle, stating that “equitable and adequate compensation will be provided.” Elaborating on this principle, the regulations describe the need for a compensation plan that considers the responsibility and difficulty of the work as well as the level of compensation needed to compete in the labor market, among other pertinent factors. During our review of the four counties’ salary-setting processes, we often saw that the county officials had established salary ranges for specific job classifications and that some of these salary ranges for those in classified positions included incremental salary steps within the salary ranges. For example, a county may have a job classification called human resources analyst I with a salary range between $4,611 and $6,048 per month and a seven-step salary schedule that spans the $1,437 difference between the minimum and maximum salary amounts. If they demonstrate at least “competent” performance, human resources analysts can advance to higher steps each year until they reach the highest possible salary level for the position. How quickly a human resources analyst can reach the highest level depends both on the employee’s performance and on the salary step at which he or she began employment.
Employees who work in positions covered by merit-based rules do not always begin their employment at the lowest possible salary step. The four counties we visited have policies allowing executive-level managers to decide when to hire someone above the minimum salary step (sometimes referred to as the classification’s hiring rate) by taking into account the candidate’s particular skills and experience in relation to the classification. In other circumstances, the counties’ policies may dictate that an existing county employee who transfers or promotes to a different classification be placed in the nearest salary step that allows for a preestablished increase in pay. Our earlier example’s human resources analyst who earns $6,048 per month might later promote to an administrative analyst position that has a salary range of $5,139 to $6,740 per month. When the county completes the transfer, the county’s compensation rules might require the employee’s placement into the fifth salary step, or $6,385 per month, which provides at least a 5 percent increase over the employee’s pay in the previous position.
In contrast, counties can, but are not required to, follow CalHR’s regulations for county employees appointed to unclassified positions. In some cases, these unclassified positions have broad pay ranges without incremental salary steps. For example, a county’s public health director may have a broad salary range that spans a minimum of roughly $174,000 per year to a maximum of nearly $223,000 per year. The county’s salary-setting process in this circumstance can involve—among other possible ways to decide on a starting salary—negotiations with the successful candidate or the selection of a specific rate within the established salary range by the local board of supervisors.
Scope and Methodology
The Joint Legislative Audit Committee directed the California State Auditor to review county pay practices and policies in Santa Clara and three other counties that are representative of California’s counties. The audit scope includes four audit objectives. Table 1 lists the audit objectives and the methods we used to address them.
|1||Review and evaluate the laws, rules, and regulations significant to the audit objectives.||We considered federal and state prohibitions on sex-based wage discrimination, such as the requirements found in the federal Equal Pay Act of 1963, as amended, and the California Equal Pay Act as codified in the Labor Code. We also considered provisions of the Government Code and applicable state regulations regarding the hiring and payment of county employees under merit-based personnel systems.|
|2||Perform the following for a selection of four counties, including Santa Clara County, for the most recent five-year period:||To address this objective, at Fresno, Los Angeles, Orange, and Santa Clara counties, we performed the following:|
|a. Evaluate the counties’ compliance with laws, policies, procedures, and practices related to county employee hiring, promotions, salaries, and gender pay equity. Evaluate the adequacy of the policies, procedures, and practices in minimizing gender wage discrimination.||
|b. For a selection of transactions, determine whether each county consistently applied laws, policies, procedures, and practices related to county employee hiring, promotions, salaries, and gender pay equity.||
|c. Assess whether the counties justified any deviations from the applicable laws, policies, procedures, and practices identified in the previous step.||
|d. Determine which county entity, if any, is responsible for overseeing and enforcing each selected county’s adherence to relevant laws, policies, procedures, and practices related to county hiring, promotions, salaries, and gender pay equity, and assess the adequacy of the oversight and enforcement provided.||
|e. For a selection of the same or similar county departments within each of the four counties, analyze and compare data related to employee wages for at least five classifications, broken down by gender, ethnicity, education, and years of service. In addition, identify the counties that have been most effective in achieving gender pay equity and those that have been least effective. Identify possible reasons for such differences.||
|f. To the extent possible, obtain all wage and promotion discrimination complaints that county employees filed with the four counties and identify the complaints’ outcomes.||
|g. Determine what efforts, if any, each selected county has taken related to mitigating wage discrimination based on gender and assess their effectiveness.||
|h. To the extent possible, identify best practices related to mitigating any identified gender-based pay gaps.||
|3||Obtain and evaluate any relevant reports concerning counties or other public entities related to pay equity with respect to gender and provide options for the content and frequency of future reports on the same topic that could assist decision makers.||
|4||Review and assess any other issues that are significant to the audit.||
Source: California State Auditor’s analysis of Joint Legislative Audit Committee’s audit request number 2015-132 as well as information and documentation identified in the table column titled Method.
Assessment of Data Reliability
The U.S. Government Accountability Office (GAO), whose standards we are statutorily required to follow, requires us to assess the sufficiency and appropriateness of computer-processed information that we use to support our findings, conclusions, or recommendations. In performing this audit, we obtained electronic personnel and payroll data files from the four counties we visited for the purpose of selecting employees in order to review each county’s policies and procedures for hiring, promoting, and setting salaries. We also calculated various compensation statistics relating to ethnicity and gender. We performed data-set verification procedures and electronic testing of key data elements and did not identify any significant issues. To test the completeness of the data, we traced a selection of employees from hard-copy documents to the system and found no errors for three of the four counties we visited. We did not conduct completeness testing in Orange County because not all of their personnel records are stored in a centralized location. Further, we did not test the accuracy of the data because the counties use partially paperless systems, and thus not all hard-copy documentation was available for review. Alternatively, following GAO guidelines, we could have reviewed the adequacy of selected system controls that include general and application controls. However, we did not conduct these reviews because this audit is a one-time review of the four counties’ personnel practices, and we determined that it did not warrant the same level of resource investment as an audit of a state agency whose system produces data that may be used during numerous future audit engagements. Consequently, we concluded that the counties’ personnel and payroll data was of undetermined reliability for the purposes of this audit. Although this determination may affect the precision of the numbers we present, there is sufficient evidence in total to support our findings, conclusions, and recommendations.
2 Although the words sex and gender have different legal meanings, throughout this report we use the terms interchangeably except when referring to the requirements of specific state and federal laws. Sex-based wage discrimination is commonly referred to as a gender equity issue, and the difference between the lower salaries earned by women when compared to men’s salaries is commonly called the gender gap or gender wage gap. Go back to text.
3 Some of the reports we reviewed regarding the gender-based wage gap included the following: Francine D. Blau and Lawrence M. Kahn, The U.S. Gender Pay Gap in the 1990s: Slowing Convergence (October 2004); CONSAD Research Corp., An Analysis of Reasons for the Disparity in Wages Between Men and Women (January 2009); and Congressional Research Service, Pay Equity: Legislative and Legal Developments (November 2013). Go back to text.
4 In 2016 the American Association of University Women released a report on the gender pay gap that reaffirmed the findings in its October 2012 report that approximately 7 percent of the difference between men’s earnings and women’s earnings one year after graduation is unexplained. Go back to text.
5 Title 2 of the California Code of Regulations defines permanent status as an employment condition in which the employee, after the successful completion of a probationary period, can only be removed for cause, the curtailment of work, or the lack of funds. Go back to text.