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On June 11, 2019, Governor Kay Ivey signed legislation removing Alabama from the ranks of States without an “equal-pay-for-equal-work” law. The Alabama Act:

• Prohibits sex-based and race-based wage discrimination against employees who perform equal work within the same establishment. The Act defines the same establishment to be a distinct physical place of business, rather than the employer’s broader enterprise. (Note: the Federal Equal Pay Act only addresses sex-based wage discrimination).
• Prohibits potential employers from retaliating against applicants for failing to provide their wage history.
• Establishes a private right of action in state court, giving an affected employee two years from the discriminatory act to file suit.
• Requires employers adopt record-keeping practices consistent with those required by the federal Fair Labor Standards Act and accompanying regulations.

Under the Alabama Act, Employers have four affirmative defenses they can raise to justify wage disparities among employees (i.e., the employer wins the case if it can establish any of these defenses):

• A seniority system that rewards employees based on length of employment.
• A merit system that rewards employees for exceptional job performance.
• An incentive system that pays employees based on the quality of their work or the amount of work they perform.
• Any factor other than sex or race.

HB 225 is largely a restatement of an already existing federal law—the Equal Pay Act. Accordingly, defendant-employers will frequently have the option to remove these state-based equal-pay claims to federal court, assuming plaintiffs also bring analogous claims under the federal Equal Pay Act. This will likely be commonplace since, unlike its federal equivalent, HB 225 does not provide for attorneys’ fees to prevailing plaintiffs. The law also prevents double-recovery, requiring that plaintiffs return to their employer the lesser of their two awards between HB 225 and the Equal Pay Act.

HB 225 also expands employees’ rights past the equivalent federal protections by preventing wage-history retaliation and protecting against race-based wage discrimination. Moreover, its passage increases the focus on potential pay disparities amongst Alabama employees—whether these disparities are known or unknown. As such, employers with employees in Alabama should proactively review their compensation systems, identifying relevant disparities and documenting justifications for the same. Employers should also take added care when inquiring into the wage history of prospective employees. Modest adjustments to company practices may include updating hiring documents to eliminate questions seeking an applicant’s wage history or requesting consent to obtain such information. This law will become effective September 1, 2019.

Please reach out to your contacts in the Firm’s Labor & Employment Practice if you have any questions or comments about this new Act.

This client alert is for information purposes only and should not be construed as legal advice. This information in this client alert is not intended to create and will not constitute as a lawyer-client relationship.