Most job postings in California will soon include pay ranges. As of January 1, 2023, Golden State employers with at least 15 employees must list salary ranges for jobs. In a new twist on salary range disclosures, the wage scale must also be provided upon request to employees for the job in which the worker is currently employed. The new legislation will affect about 200,000 companies, employing approximately 19 million workers. Democratic Gov. Gavin Newsom signed the changes into law on September 27. Employers already must provide job applicants with the pay range when requested. Additionally, employers cannot ask applicants about their salary history during the hiring process.
As of May 2023, the changes to existing state law also require companies with 100 or more employees to provide expanded pay data reports to help state regulators easily identify pay disparities. The new measures intend to use transparency to close the gender pay gap. In California, women are paid 88 cents for every dollar paid to a man, according to the Bureau of Labor Statistics.
The new measures intend to use transparency to close the gender pay gap.
Many employers are considering pay data disclosures. More than half — 62% — of the organizations surveyed this summer by Willis Towers Watson said they are considering, or are already planning, to disclose pay ranges, even in places where it’s not mandated by law.
Under the California law, employers with 15 or more employees, including part-time employees, must include the pay scale for a position in all job postings. Both private and public employers must comply. “Pay scale” means the salary or hourly pay range that the employer will compensate for the position. Benefits, bonuses, and equity stakes are not included in the law’s stipulations.
The law requires that employers with 15 or more employees that use a third party to “announce, post, or publish a job posting” provide the salary information to the third party. The third party must include the salary range in the job posting.
Starting in 2023, when requested by the employee, employers must provide that employee with the pay scale for the job in which they are currently employed. Other states only require that salary ranges be provided in job ads.
Under the existing state law, private employers with 100 or more employees and who are required by federal law to file an annual Employer Information Report (EEO-1) must submit a pay data report on or before March 31 of each year to state authorities. The pay data report must include the number of employees listed in specified job categories by:
Employers with multiple locations must submit a report for each site and a consolidated report that includes all employees.
Under the new pay data reporting requirement, private employers with 100 or more employees, including contractors, must submit a pay data report by May 10, 2023, instead of the March deadline. In succeeding years, the reports will be due around mid-May. In addition to the required information, future pay data reports must also include the median and mean hourly rate by race, ethnicity, and sex within the job categories necessary to better identify gender and race-based pay disparities. It is important to note that other jurisdictions do not require this information. Instead of a consolidated report, under the new law, employers with multiple locations must submit a separate report that covers each site. Companies who don’t comply could face fines of $100 per.
The changes in the law also include that a private employer with 100 or more employees must submit a separate pay data report for employees hired within the prior calendar year through third-party staffing agencies Employers will have to supply the names of all of the third-party labor contractors used to provide the workers. This pay data report must be filed in May 2023.
The amendments to the existing law impose lengthy recordkeeping requirements on employers. Employers must keep records of a job title and wage history for each worker for the duration of their employment and for 3 years after the end of the individual’s employment. The records must be available for inspection by the Labor Commissioner. This requirement will allow the Labor Commissioner to determine if there is still a pattern of wage discrepancy.
Workers have until 1 year after the date the person learned of the violation to file a written complaint with the Labor Commissioner. Workers can also file a lawsuit in civil court for injunctive and other relief.
Civil penalties for violations range from $100 to $10,000 per violation. The amount of the fine will be based on a “totality of the circumstances” determination, including whether the employer previously violated the statute. A penalty will not be assessed for first-time violations if the employer can show that all job postings for open positions have been updated to include relevant pay scales.
The California law is the latest in a line of mandated pay disclosures focused on employers. Colorado’s pay transparency law went into effect in January 2021. It requires employers to include compensation in job postings and retain job descriptions and salary wage records. It also requires that employers notify employees about opportunities for advancement. New York City’s pay transparency law was enacted on November 1, 2022. Big Apple employers with 4 or more workers must include the minimum and maximum salary in job postings for:
The law covers a wide range of workers, including:
The salary transparency law was set to go into effect in May. However, it was delayed until November because of opposition from business groups. New York state also has a pay transparency bill. The measure is awaiting the governor’s signature. In June, state lawmakers passed a bill similar to the California legislation. If signed by Gov. Kathy Hochul, the bill would take effect in 2023. New York business groups have pushed back on the proposed law, asking the governor to remove a requirement that employee benefits must be listed and requesting exemptions for jobs that can be done remotely.
For the most part, employers cannot use a worker’s prior salary history when making a compensation offer to a job applicant.
The move for pay transparency also includes the growing trend of jurisdictions imposing salary history bans. Each authority has taken its own approach and has slightly different requirements. For the most part, employers cannot use a worker’s prior salary history when making a compensation offer to a job applicant.
A rapidly growing number of states, cities, and counties require wage transparency. Employers with more than one location should consider adopting a consistent national policy regarding including salary ranges in job postings and providing pay ranges to job applicants. Employers should also perform an internal audit of employee wages to ensure there are no significant discrepancies or inequities that could be viewed as biased based on gender and race. When you conduct an audit, execute it under the purvey of an attorney. This will ensure the information is confidential under the attorney-client privilege.