What is California Pay Transparency Law?

California’s pay transparency law mandates businesses to publish pay ranges in job descriptions, aiming to eliminate wage disparities and promote equitable compensation practices. The law impacts both employers and employees by requiring transparent salary structures, prohibiting salary history inquiries, and empowering employees with the right to know and negotiate fair pay.

By Brad Nakase, Attorney

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Introduction

California’s pay transparency law mandates businesses to publish pay ranges in job descriptions, sparking various questions and concerns. This law significantly impacts job ads in California, now more frequently listing salary ranges. It goes beyond job postings, granting employees rights to know their pay range and imposing new recordkeeping and reporting duties on businesses. However, the implementation and applicability of this law remain somewhat unclear, according to many California employer class action defense attorneys.

In California, progressive labor laws for fair and equal treatment of employees have been in place for decades. One significant legislation is the California pay transparency law, which seeks to eliminate the enduring gender pay gap and promote workplace openness. In this article, our California employment attorney sheds light on the nuances of law, its important provisions and how they apply to both employers and employees. This introduction sets the stage for an in-depth exploration of the pay transparency law in California.

Overview of the California Pay Transparency Law

California AB 168 is known as the California pay transparency law. This law aims to increase transparency in the workplace by preventing an employer from asking or using an applicant’s salary history as a guideline for determining his or her wage. It also mandates that employers should provide applicants with the pay scale for a post upon reasonable demand.

California Pay Transparency Law: Aims and Objectives

The major goal of the California pay transparency legislation is to put an end to the historical continuation of wage gaps between men and women. By preventing the use of a salary history in determining wages, the law seeks to end this chain of wage discrimination and encourage merit-based compensation practices according to a person’s skills and work experience.

  1. Prohibition on Salary History Inquiries: Under California’s pay transparency law, employers may not inquire or use an applicant’s salary history as a factor to determine their pay. This provision seeks to stop wage disparities from being perpetuated based on a person’s past salary, which might have been influenced by discriminatory practices.
  2. Pay Scale Disclosure Requirement:  Another important provision of the California pay transparency law requires employers to give a pay scale for a position upon the reasonable request from an applicant. This provision guarantees that prospective employees get access to basic information regarding the salary ranges so that they can make decisions based on facts and negotiate fair compensation.

Impact of the Law

The California Chamber of Commerce’s hotline has seen a surge in calls about the pay transparency law, exceeding other laws. A large event focused on this law attracted more attendees than usual. Employers seeking advice on complying with pay equity laws suggest these laws are effective in promoting compensation transparency and fairness. These observations reflect the significant impact of California’s pay transparency law on both employers and employees.

Who Must Post Pay Scales in Job Postings

According to the law, employers with 15 or more employees must list pay scales in job ads. The Department of Industrial Relations clarifies that at least one employee must be in California. If a role can be filled locally or remotely in California, salary ranges must appear in the posting. This ensures applicants know the expected compensation for a position. This requirement highlights a key aspect of the pay transparency law in California, ensuring potential applicants are well-informed.

Employees’ Right to Request Salary Range

The law entitles employees to ask their employer about their current position’s salary range, which the employer must provide. This right extends to all company sizes. There’s uncertainty about its applicability to non-California residents working for California-based companies. Generally, if remote work benefits a California company, the law applies wherever the employee works. This provision of California’s pay transparency law empowers employees to be more informed about their compensation.

Limits on Pay Range Size

The law doesn’t specify a maximum size for pay ranges. Employers must post ranges reflecting the expected pay for a job. The reasonableness of a pay scale is subject to review and may be scrutinized if it appears to circumvent the law. Employers are encouraged to ensure their pay ranges are justifiable, considering factors like required experience. This part of the pay transparency law in California focuses on the authenticity of the posted pay ranges.

Reporting Violations and Enforcement

Different agencies enforce various aspects of the law. Companies with over 100 employees must submit detailed pay data to the Civil Rights Department. Failure to comply can result in court orders or fines. The Labor Commissioner’s Office enforces the sections on job post pay scales and salary information requests. This office handles complaints and has begun informing employers about the new law. Enforcement mechanisms are a crucial component of upholding the pay transparency law in California.

Filing Complaints and Penalties

Individuals can anonymously report suspected job posting violations to the Labor Commissioner’s Office. The department accepts anonymous retaliation complaints, although the current form requires a full name, raising anonymity concerns. Affected individuals can also sue non-compliant employers. Penalties vary, with fines for not filing required pay data reports and for failing to meet salary range, pay record, and posting requirements. The severity of the penalty depends on factors like past violations. This section details the avenues for addressing violations of the pay transparency law in California.

Implications for Employers

  1. Ensuring Compliance with the California Pay Transparency Law: Employers should be aware of the provisions contained in California pay transparency law to ensure compliance. They need to evaluate their hiring practices and revise the policies whereby no questions about salary history should be raised in the recruitment process. Employers should also put into place ways to make available pay scale details to applicants when requested.
  2. Promoting Equal Pay Practices: In particular, the California pay transparency law offers employers the chance to revisit their salary structures and bring pay equity into their organizations. Employers can achieve law’s objectives of establishing fair and transparent compensation practices by implementing factors such as qualifications, experience, job responsibilities etc.

Implications for Employees

  1. Enhancing Employees the Ability to Negotiate a Reasonable Salary: The California pay transparency law gives power to employees by making it possible for them to learn about the scale of payments at their workplace. With this knowledge, the employees are better placed to bargain for fair pay according to their qualifications and value of the job in the market. This provision is geared towards redressing the previous inequality in salary negotiations, especially for women.
  2. Promoting Workplace Transparency: The California pay transparency law encourages workplace transparency by banning salary history inquiries and requiring disclosure of pay scales. As a result, employees are now capable of making more informed decisions regarding their career paths and evaluate the compensation policies by an employer to see if they correspond with their expectations and objectives.

Conclusion

California’s pay transparency law has significantly changed business operations in the state. It aims to ensure wage practices are transparent and equitable by requiring specified pay ranges in job postings and granting employees rights to salary information. As the law evolves and raises new questions, legal guidance remains essential for both employers and employees. The conclusion underscores the transformative impact and ongoing relevance of the pay transparency law in California.

The California pay transparency law has a key role in ensuring equal pay and workplace transparency. The act aims to mitigate the gender pay gap and encourage equitable compensation practices by preventing salary-history inquiries and mandating disclosure of pay scales. Employers will need to change the way they hire in line with the law, and employees will now be able to negotiate their compensation more knowledgeably. With California continuing to lead the way in labour law reform, the pay transparency law is one of the most important measures yet taken towards greater equity and fairness in the workplace.

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