SB 1458 and Gender Pay Disparity

Will the California workers’ comp system soon be involved in gender pay issues?

That could happen under SB 1458 (sponsored by Santa Barbara State Senator Monique Limon), currently awaiting an April 18 hearing of the California Senate Committee on Labor, Public Employment and Retirement.

SB 1458 (see link to the text at bottom of this post) would require an adjustment of the average weekly wage under Labor Code Section 4453 “by the percentage of disparity in earnings between genders as reported by the applicant’s employer in its pay data report to the Department of Fair Employment and Housing “.

To understand this, we must look at an important law signed by Governor Newsom in 2020.

SB 973 was enacted in 2020 and codified as Government Code 12999. It requires that private employers with 100 or more employees submit an annual pay data report to the California Department of Fair Employment and Housing. Reports to the DFEH are required even if some of the employees are working at different locations in California or out of state. SB 973/Government Code 12999 go beyond what federal disclosures had been required by the EEOC up til 2019.

Government Code 12999 reports require a breakdown of the number of employees categorized by race, ethnicity and sex (including binary) in 10 different job categories (executives or senior level officials/managers, first or mid level officials/managers, professionals, technicians, sales workers, administrative support workers, craft workers, operatives, laborers and helpers, and service workers). At the bottom of this post you can find links to the 2020 Senate Floor Analysis and the 2020 Assembly Analysis of SB 973.

Under SB 973, the DFEH and DIR Division of Labor Standards Enforcement (DLSE) were prohibited from making public any individually identifiable information (including data associated with a specific person or business) prior to an investigation o enforcement action. The SB 973 analysis notes that it “empowers the DFEH to receive, investigate, conciliate, mediate and prosecute complaints alleging unlawful pay discrimination on the basis of sex, race or ethnicity. made illegal under the Equal Pay Act.“

I look forward to hearing more about how the proponents of SB 1458 believe their bill would work in conjunction with Government Code 12999. In the meanwhile, what follows are preliminary thoughts and questions about the proposed measure.

First and foremost, gender based pay discrimination is unfair and morally wrong as well as illegal. 

But whether gender pay discrimination is best dealt with through actions under the California Fair Pay Act, the California Fair Employment and Housing Act, or other state and federal remedies rather than California workers’ comp system is a question that will need to be considered.

To my knowledge SB 1458 is the first bill that would require the WCAB to award increased benefits based on pay discrimination against a protected class. If enacted, the door will be opened for identity based equity claims to be considered in the workers’ comp system.

Some readers would celebrate this. Others may fear the workers’ comp system getting involved in addressing broader societal issues.

As SB 1458 gets a hearing in the Capitol, we may all learn more, but for the moment here are some reasonable questions and concerns for consideration:

• Since Government Code Section 12999 only requires large employers to file pay data reports, SB 1458 would appear to apply only to large employers. Is it workable to have such a distinction, effectively excluding from the law the large portion of the California workforce that works for small and medium size employers?

• Government Code Section 12999 requires data on only 10 large categories of workers. Within those categories there are many types of work and many types of compensation arrangements (mandatory overtime, voluntary overtime, shift differential pay, performance incentives, differential pay based on education, skills, date of hire, union seniority, geographic region  etc etc). Exactly how would the WCAB compare the injured worker’s average weekly wages to a data set based on average pay of one of the 10 broad categories?

• Government Code 12999 and the DFEH require that data reports identify pay within “pay bands”. For example one pay band in 2022 is compensation between $68,120 and $87,359. Since a range must be reported, how can that be used to compare with a particular injured worker’s pay to determine pay disparity?

• Since under Government Code 12999 (i) and (j) individually identifiable information re a person or company is not publicly available except to the DFEC and DLSE in enforcement actions, then how does that information become available to an injured worker, their attorney or the WCAB? Can it be legally used by the WCAB?

• Does SB 1458 contemplate a simple math calculation of the disparity between what wages the worker received and the pay data report for one of the 10 employment categories? Would an employer have the right to introduce evidence to rebut this by showing that the comparison with broad pay data categories is not valid? Could they present a defense showing that reasons for the disparity are not gender related?

• What sort of additional resources will be required to process these issues under SB 1458? Will there be economists testifying at the WCAB? Will there be depositions of HR and payroll people and supervisors? Will defendants utilize corporate defense counsel to handle those issues? Are those concerns overblown, or is there potential for significant frictional cost issues at the WCAB? Will the DWC be given sufficient additional judge teams if there is a need?

• Could an alternate remedy be designed to give an additive workers comp benefit to workers who have prevailed in a DFEH, DLSE or EEOC action that substantiated pay discrimination?

• SB 1458 addresses earnings disparity based on gender. If this is a valid approach, should the concept also apply to pay disparity for different racial and ethnic groups? If so, what might that look like?

• Would bringing these gender pay issues into the workers’ comp system provide meaningful change in a way that FEHA, the Fair Pay Act and other federal and state laws do not? 

• Are there any studies of gender pay discrimination and the workers’ comp system? Given that SB 1458 deals with average weekly wage calculations the are used as a basis for determining indemnity rates (subject to statutory maximums),  what sorts of industries and occupations would be most likely affected?

• If there was a WCAB finding of gender pay disparity and a revised wage computation mandated, would the financial impact be absorbed by the insurer or charged directly against the employer? How would this affect “X-Mods” and workers’ comp insurance rates?

Again, gender pay discrimination is a significant issue. Gender pay discrimination is an issue front and center for many CAAA members and worker allies in the labor movement. But whether SB 1458 is a winner or a well intentioned but flawed bill may depend on answers to some of the questions raised above.

Here is a link to the current version of SB 1458 (Limon):

https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202120220SB1458

The 2020 Senate Rules Committee Floor Analysis and Assembly Analysis of SB 973/Government Code 12999 can be found here:

https://leginfo.legislature.ca.gov/faces/billAnalysisClient.xhtml?bill_id=201920200SB973

By Julius Young

Courtesy of Workers' Comp Zone

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