Governor Gavin Newsom's recent approval of Senate Bill 497, also known as the Equal Pay and Anti-Retaliation Act, on October 8, 2023, represents a significant shift in California's legal framework. This bill simplifies the process for employees to establish a prima facie case of retaliation against their employers, amending Labor Code §§ 98.6, 1102.5 and 1197.5

Under current California law, retaliation claims involve a three-stage burden of proof process. First, the employee has the burden to demonstrate a prima facie case of retaliation. Then the employer must provide a legitimate, non-retaliatory reason for their actions. Finally, the employee must prove that the employer's stated reason was merely a pretext for retaliation.

SB 497 introduces a crucial change by initially establishing a rebuttable presumption in favor of the employee bringing a retaliation claim. If an employer takes any adverse employment action against an employee within 90 days of the employee exercising their rights under the Equal Pay Act (Labor Code § 1197.5) or Labor Code § 98.6, it will be automatically presumed that the employer's motivation was retaliatory. This new presumption significantly streamlines the process for employees to prove retaliation claims against their employers.

SB 497 also reinforces existing laws protecting employees engaging in various protected conduct, such as filing complaints, participating in investigations, or exercising their rights under labor laws. Furthermore, it increases penalties for employers who retaliate against employees for disclosing information to government agencies or testifying in investigations, potentially imposing fines of up to $10,000 per employee for each violation, with the penalty going to the retaliated employee.

Additionally, SB 497 strengthens the principle of equal pay for substantially similar work, regardless of gender or race/ethnicity. The bill ensures that employees cannot be retaliated against for disclosing their wages, discussing wages with colleagues, or inquiring about another employee's wages.
With SB 497 introducing a rebuttable presumption of retaliation, California employers must be proactive in maintaining labor law compliance and ensuring well-documented disciplinary actions. This may involve updating record-keeping practices, providing HR departments with training on comprehensive documentation and non-retaliation principles, and ensuring that supervisors adhere to company policies and promote a respectful work environment. Adapting to this evolving legal landscape is essential to navigate the changes effectively.

Staying informed, adopting a proactive posture, and consulting with legal counsel will be critical for California employers to navigate these changes effectively. SB 497 is scheduled to become effective on January 1, 2024, making it crucial for both employees and employers to understand these adjustments and adapt their practices to maintain a fair and legally compliant work environment.