California mandates pay range disclosure in continued effort to address gender wage gapBy on
Business Practices | Legal
Beginning Jan. 1, 2023, California businesses with 15 or more employees will have to disclose pay ranges in their job ads, according to SB 1162, which Gov. Gavin Newsom signed into law on Sept. 27. It also requires all employers in the state to disclose pay ranges to employees that request them.
Employers with 100 or more employees are already required under federal law to submit an annual Employer Information Report (EEO-1), including pay data as well as race, ethnicity, and sex in specified job categories but they’ll also now be required to submit a separate report with the same information on their labor contractors. New information in both types of data reports that is to be included is the disclosure of “median and mean hourly rate for each combination of race, ethnicity, and sex within each job category.”
“An employer, upon reasonable request, shall provide the pay scale for a position to an applicant applying for employment,” SB 1162 states.
“An employer, upon request, shall provide an employee the pay scale for the position in which the employee is currently employed. An employer with 15 or more employees shall include the pay scale for a position in any job posting. An employer shall maintain records of a job title and wage rate history for each employee for the duration of the employment plus three years after the end of the employment in order for the Labor Commissioner to determine if there is still a pattern of wage discrepancy.”
It will be up to the labor commissioner to impose civil penalties if there are violations. And “a person aggrieved by a violation of these provisions” will be allowed under the new law “to bring a civil action for injunctive and any other appropriate relief.”
Newsom’s Office said in a news release that SB 1162, along with AB 1287 to prohibit the “pink tax” on products marketed to women, make up “a package of priority legislation signed by the Governor to strengthen California’s commitment to advancing gender equity and protecting the rights of women.”
“California has the strongest equal pay laws in the nation, but we’re not letting up on our work to ensure all women in our state are paid their due and treated equally in all spheres of life,” Newsom said, in the release. “These measures bring new transparency to tackle pay gaps, end discriminatory pricing of products based on gender and expand supports for survivors of abuse and assault.”
SB 1162 builds on a SB 973 that Newsom signed in 2020 “to identify patterns of wage disparities through mandated statewide pay data reporting,” according to the release.
According to CNBC, supporters of the legislation say it’s a big step forward in helping to close racial and gender wage gaps.
“Women, and especially women of color, are literally being robbed of wages every year,” Equal Rights Advocates Policy Director and Deputy Legal Director Jessica Ramey Stender told CNBC. “That is money that could go to rent, food, diapers, education, retirement savings. So the time has really come for robust pay equity legislation here in California and beyond.”
Colorado, Nevada, New York, New York City, and Washington have also passed similar legislation. Seventeen perfect of 388 North American companies polled in Willis Towers Watson (WTW)’s 2022 Pay Clarity Survey of said they’re already disclosing pay range information in U.S. locations where they’re not required by local or state laws to do so.
“In addition, 62% of organizations are planning or considering disclosing pay rate information in the future, even where there are not local mandates requiring them to do so,” WTW states. “This will include information such as hiring range and full salary range, with 58% of companies planning on doing the former and 48% the latter.”
WTW North America Fair Pay Co-Lead Mariann Madden said in a news release that WTW expects the “recent wave” of pay transparency legislation to continue.
“Regulatory requirements are only one factor in the expected increase in disclosures and communication about pay,” she said. “Job seekers and current employees want to know and understand that they are treated fairly and are provided with equal opportunities to thrive and grow within the organization.”
Benefits consulting firm, Filice, states in a recent advisory to employers that “While the approach may feel drastic to private employers, it has been used successfully in the public sector for many years.”
“In fact, after the initial rough patch (which may require a fair bit of work from employers who lack documentation around their pay structure), these pay transparency requirements are likely to streamline hiring, compensation, and talent development processes and make your business run more efficiently. And in 2023, it’s estimated that 25% of all private employers will be required to post pay ranges with their job ads.”
Filice said employers should expect to start getting pay range requests from their employees as well as feedback and discussion among co-workers (which is a protected practice under state and federal law) on the ranges.
“If the ranges you post in ads or provide to current employees when asked seem too wide, they may think you’re providing bogus information. This will breed distrust and could potentially lead to employees reporting you. Or they may wonder who among them makes that little or that much, and why. If the ranges are reasonable but you have current employees outside of those ranges, that will likely lead to some immediate feedback.”
Filice also provided these tips for employers:
- “Pay ranges should align with specific job descriptions.
- “If you have employees whose titles or job descriptions don’t match what they’re doing, update their job title or description.
- “Within each pay range, you should have an explanation of how an employee moves from the bottom of the range to the top.
- “You should also be able to explain how an employee goes from one pay range to another and if pay ranges overlap, why.
- “Be prepared to explain why employees with the same job title or job description receive different compensation using only the allowable reasons for pay differentials in California (this list includes factors like seniority and merit but doesn’t include market factors). To answer this question well, you may want to consider doing a pay equity audit.
- “If you are already aware of pay equity issues or become aware of them over the next few months, start correcting them as soon as possible. You may want to consult with an employment attorney in California to strategize how to limit your liability.”
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