More and more states are recognizing there is a pay gap between the genders. Washington is the latest state to address the gap through legislation. The near-final law, HB 1506, is commonly referred to as the Equal Pay Act. It is currently awaiting the Governor’s signature, which we can expect any day now.
Equal pay laws are complicated and understanding your obligation as an employer is critical to avoiding hefty civil penalties and liability. Washington’s Equal Pay Act specifically notes the difficulties women can face in obtaining equal pay and moving up in companies. The Washington law attempts to address these issues by prohibiting employers from discriminating against similarly situated employees based on gender.
So what constitutes discrimination in this context? Discrimination occurs when an employer pays similarly situated employees different wages because of the employee’s gender, or when the employer fails to promote or advance an employee because of their gender. Employees are “similarly employed” if the performance of their job requires similar skills, efforts, responsibility, and if the jobs are performed under similar working conditions. Job title alone is not determinative.
Employers can pay similarly situated employees different if: 1) the difference is based on a bona-fide job factor that is consistent with business necessity; 2) is not based on a gender based differential, and 3) accounts for the difference. Bona-fide factors include: education, training, or experience; a seniority system; a merit system; a system that measures earning by quantity or quality of production; or a bona-fide regional difference in compensation levels. Employers bear the burden to prove there was a bona-fide factor for the difference in pay, which means that businesses had better get it right. Note that employers may use the same bona fide factors in determining whether to promote or advance employees.
Cannabis companies are not sheltered from the new law. Although cannabis companies boast a higher percentage of female founders and executives than other industries, women still face unique challenges in the industry. Studies suggest that while women have success starting cannabis businesses, they do not retain that success. As the cannabis industry has grown, female ownership and executive percentages has also dropped. Finally, as individual companies grow, they tend to adopt more traditional business structures that results in a high percentage of males in senior roles.
Every Washington cannabis company should have a plan in place to ensure its business practices meet the requirements of the new Equal Pay Act. A good place to start is to have an expert audit your payment practices and assist in drafting a policy identifying the factors that are considered in setting wages and offering promotions. Cannabis companies in other states should also follow suit: Equal pay promotes employee retention, creates positive brand capital, and–most importantly of all–it’s the right thing to do.
