Get a clear overview of California’s pay transparency law, including salary range disclosures, reporting requirements, covered employers, and remote postings. Ensure compliance, avoid pay secrecy pitfalls, and align internal practices with evolving multi-state rules, pay equity expectations, and penalties.
By Brad Nakase, Attorney
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It can seem like a confusing mix of new regulations and rules when new legislation is introduced. Additionally, it can be very difficult for multi-state firms to comply with state legislation that may be contradictory or conflicting. They can be left unsure about whether and how the new regulations affect them and their staff. Employers have to invest the time to understand how these laws impact them. They must know what to do to comply with the recent CA pay transparency law that has been implemented at the state level.
It is critical to know which laws apply to you and your company. Employer obligations may be affected by remote employees across state boundaries (regulations vary across states).
The practice of employers informing people, either internally or externally, about employee remuneration norms is known as pay transparency. There is no one level or degree that defines pay transparency. Rather, it is defined as a continuum that allows employers to select different levels of openness according to their own compensation plan or state and local requirements.
By enacting legislation requiring the publication of wage ranges, requiring the reporting of pay data, and outlawing pay secrecy, local and state governments are attempting to close the pay gap. Although they are related, pay equity and pay transparency are not the same thing.
In general, pay equity refers to giving workers the same compensation for comparable work. Many pay equality requirements are established by federal law through the Civil Rights Act, the Equal Pay Act of 1963, and other historic statutes. Furthermore, there are now pay equity laws in existence in all 50 states that either replicate or go beyond the federal requirements.
The majority of labor economists consistently calculate a pay disparity between genders and additional protected groups, despite the fact that numerous pay equity rules have been in place for decades. With the goal of resolving ongoing pay disparities and eliminating future unwarranted and discriminatory pay disparities, state legislatures are considering a variety of instruments outside of equal pay statutes.
An employer must disclose the range of wages they intend to pay a worker for a certain function in accordance with the wage and salary range disclosure law. Although there are salary range disclosure regulations in more than 10 states and regions, there are significant differences in the laws, and compliance is not universal.
An increasing number of states mandate that businesses disclose in a job posting the range of compensation they anticipate paying for work completed in that position. Washington, Nevada, California, Maryland, Rhode Island, and Connecticut have already passed laws pertaining to wage range disclosures. Similar laws have also been passed in some localities in Ohio, New Jersey, and New York.
Employers are required to provide the range of wages only upon request from an external candidate (some states grant internal staff the same right) or when a candidate reaches a specific point in the interview process. This is one way that some states have addressed pay transparency.
This kind of salary range disclosure requires an occurrence from a particular person to bring about the need. Providing a range of wages to candidates after they advance to the final round of interviews is an example of personalized proactive compensation range law.
Employers are required under the CA pay transparency law to include salary ranges for all open positions. Companies in California with 15 or more workers are required to include a salary range in each job posting as of 1st January 2023.
Companies from other states are subject to this CA pay transparency law if they have workers in California; even if there is just one worker, the employer must post wage ranges on every open requisition. Additionally, if a company is located outside of California but offers job openings that a Californian employee may complete remotely, the company is required to provide wage ranges for those vacant positions.
Additionally, the rule states that employers are still required to disclose their salary ranges even if third parties post job openings. The third-party advertising for the job position must include the wage range from the employer.
According to the CA pay transparency law, pay ranges don’t need to be advertised for internal staff in California. Employers are required to provide them upon request from employees.
The laws requiring wage range disclosures have been passed in various forms in New York, Connecticut, Washington, and Colorado. Employers in New York City are required to include pay ranges in all external and internal job postings as of 1st November 2022. Employers with four or more workers or any number of domestic workers are subject to this law. This holds true even if a distant candidate in New York City is eligible to apply or if the position is only partially completed in the city.
Connecticut mandates a proactive individualized pay range clause, which means that if an applicant asks for a salary range, the employer must provide it. Both internal and foreign applicants are covered by this. Colorado, however, is a state that mandates that firms include wage ranges on all publicly available job advertisements, but not on internal ones. Employers in Colorado must disclose information about any other pay kinds, including commissions or bonuses, alongside the basic pay range.
As of 1st January 2023, Washington also mandates that companies with fifteen or more workers include wage ranges in external or internal job advertisements. Health care, retirement, and additional reportable benefits have to be included in Washington state listings. Although it is not necessary for internal postings, it must be supplied upon request from an internal applicant.
Another strategy for pay transparency is pay data reporting. A state agency requires employers to provide records that break down all firm wages by age, gender, race, and ethnicity. The purpose of these reports is to hold businesses responsible for their unethical pay practices. Private companies with at least 100 workers in California are required to report to the Civil Rights Division on an annual basis.
When calculating whether a company has more than 100 staff members, both employees outside and inside of California are counted. An employer with fifty staff members in California and 50 outside of California in the reporting year is used as an example by the California regulatory body. This employer would have to disclose since they employ 100 people in total.
Displaying the mean and median hourly rate by job type, race, gender, or ethnicity is one of the newly added prerequisites for 2023. Employers who have 100 or more independent contractors are required to prepare a separate report containing salary information on their contractors, something they should do in collaboration with their staffing firms.
Similar laws have been passed in Illinois. Private firms with more than one hundred workers are required to provide the Illinois Department of Labor with a wage data report. They will receive an equal wage registration certificate. Companies have to declare that they adhere to state and federal rules regarding equal pay. They need to address any discrepancies that may exist.
Employers are not allowed by law to request that workers keep their wages a secret. Given that the method is still used in many businesses, this may seem odd to some. Many workers have received instructions not to talk to their coworkers about their income. Additionally, it may still be an unwritten standard in some situations. Although pay secrecy has long been illegal according to the National Labor Relations Act, many states are now passing legislation that outright forbids it. States with such legislation are becoming more and more common.
State-by-state laws prohibit employers from taking adverse action against workers who speak with other workers about their pay. Additionally, they forbid companies from making a confidentiality agreement a requirement of employment. Employers need to understand the law and how it affects their company, even though not all employees are covered by it (such as those in the public sector).
It is important for employers to remember that these state laws extend beyond official pay secrecy & confidentiality policies or employee handbooks.
This means that organizations could still be violating these rules and risk legal consequences, although their employee manual does not prohibit discussing pay, and the managers still advise employees against doing so, or regard any discussion about pay as taboo.
In most places, it is illegal to enquire about the past remuneration history of applicants. Since this practice of requesting applicants to disclose their history of previous earnings may cause and exacerbate pay disparities, several states have enacted laws prohibiting this practice.
Employers may continue to make pay decisions established by previous organizations, which may have maintained that individual’s wage artificially low, if they use an applicant’s previous income to determine or justify the wage going forward.
A growing number of jurisdictions are taking steps to outlaw salary history inquiries, even though not all have done so yet. It is acceptable for employers to inquire about candidates’ pay aspirations (e.g., What are you hoping to plan to make in this position?). However, queries about prior earnings ought to be eliminated from applications and interview questions due to the difficulties of having distinct application forms for various jurisdictions.
In an effort to adhere to new local and state pay transparency laws, businesses are pledging to pay equity everywhere. One aspect of pay equity is pay transparency, as was previously discussed. It raises awareness of businesses’ compensation policies and advocates for equal compensation for equal labor. How employers handle and discuss pay-related issues both internally and externally can have an impact on their reputations.
Consider the pay transparency pattern as a way to manage your brand’s reputation as well as a way to comply with applicable legislation. It’s essential to think that releasing pay information today is not important just because it’s mandatory. It says about your brand to the general public, prospective & existing employees.
It’s vital to keep in mind that a general countrywide policy for your business might not be the solution (state laws vary). A one-size-fits-all strategy solution may be difficult to find for multi-state organizations. It is critical to consider remote or hybrid workers when understanding the subtleties and variations of state regulations.
When posting job vacancies and employing personnel, it is necessary to know how to pay equitably. You must understand how regulations concerning pay transparency affect your company. To comply with them, it is necessary to send wage data in a timely manner. Ask your legal and employment experts how you are concerned with the effects of state legislation on your company.
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