Here’s What You Need To Know About California’s New Pay Transparency Law
In less than two weeks, job seekers in California will finally know how much a job pays when they apply for it — if companies don’t figure out a way around a new law.
Starting on Jan. 1, employers with at least 15 workers will have to include pay ranges in job postings. Employees will also be able to ask for the pay range for their own position, and larger companies will have to provide more detailed pay data to California’s Civil Rights Department than previously required.
California isn’t the first state to force businesses to put their cards on the table. Colorado took that step in 2019, and a similar requirement went into effect in New York City in November. Washington state has its own version that will also kick in on Jan. 1, and a similar statewide bill in New York awaits the governor’s decision.
The goal of the California law is to reduce gender and racial pay gaps. But New York City’s measure had a bumpy start, with some employers posting unhelpfully wide ranges the first day the law was in place. When Colorado rolled out its law at the beginning of 2021, some companies posted remote jobs that they said could be done from anywhere in the U.S. — except Colorado — dodging the requirement. That wasn’t widespread; about 1% of remote job listings included a Colorado carveout, according to reporting in The Atlantic.
But since California has nearly 7 times as many people as Colorado, according to U.S. Census data, excluding Californians in a remote job listing would come at a higher cost.
“California’s just such a huge economic center,” said Lisa Wallace, co-founder of Assemble, a compensation management platform. “There just aren’t that many industries that are not going to be touched by this.”
What’s the pay range?
Here’s what California job seekers can expect to see more frequently come January: $44 an hour to be a plumber in Berkeley; $18.38-$28.51 an hour for an assistant teacher job in Los Angeles; $74,600 – $141,000 per year for a future compensation analyst in Davis. If companies aren’t adding ranges, people can sue or file a complaint with the Labor Commissioner’s Office, which can issue a penalty of $100 to $10,000 per violation. Companies that don’t have pay ranges in job postings won’t get penalized for their first violation, so long as they add the information.
In addition to preparing to post pay ranges in job listings, companies that don’t already have pay bands for current employees should put them in place, and they should make sure that there aren’t pay disparities based on race, sex, or other protected classes between employees doing substantially similar work , said Jacklin Rad, a lawyer who advises employers on California workplace laws at Jackson Lewis, a law firm.
Businesses are about to have their pay scrutinized by job candidates and employees, said Wallace, the compensation platform company co-founder. “You better make sure that you have a really strong answer for why an employee is paid less,” than the posted range for a similar-looking job, she said. The new California law is uncovering that a lot of organizations have been operating without pay bands, Wallace said. Many of the company’s earliest customers were tech and biotech businesses, Wallace said, but since bill was signed into law she’s seen increased interest from other sectors, including manufacturing and utilities.
One question that arose immediately when New York City’s law went into effect was how wide can a pay range be without violating the law? Some postings included ranges where the high end was about $100,000 more than the low end.
California’s law explains the required payscale as “the salary or hourly wage range that the employer reasonably expects to pay for the position.”
“It’s really ambiguous,” said Rad, the lawyer. “A lot of attorneys that work in this sphere ask themselves: ‘You know, if the range is too wide, then does that defeat the purpose of pay transparency?’”
CalMatters reached out to the Labor Commissioner’s office, which is charged with enforcing the payscale component of the law. The office didn’t make anyone available to be interviewed, and did respond to a detailed list of questions about how the law will be interpreted.
California government agencies include pay scales in job postings, and some of the ranges are large. The Civil Rights Department, for example, recently had a posting for an “Assistant Deputy Director, Workforce Data Officer” with a listed pay range of $7,976 – $19,321 per month, which translates to about $96,000 – $232,000 per year. Another posting, for a Deputy Chief Counsel at the Civil Rights Department had a similar range.
Pay ranges are set by the state’s human resources agency, CalHR, and are influenced by bargaining with unions, said Adam Romero, deputy director of executive programs at California’s Civil Rights Department. Those two positions are “very senior,” and most roles don’t have pay ranges that wide, Romero said.
Reporting pay data
The second major component of the new law is that businesses with 100 or more employees will have to start reporting more detailed data on what they pay workers to the state. It builds on a 2020 law that required companies to submit reports to the state’s Civil Rights Department breaking down how many employees they have in each job category and pay band by sex, race, and ethnicity. The goal was to enable state agencies to more identify wage disparities more efficiently, and to prompt companies to assess their own pay.
The reports are used “in individual investigations of complaints of pay discrimination or other types of complaints of civil rights violations against employers,” said Romero at the Civil Rights Department. The data on its own doesn’t prove there’s been a violation of the law, but it provides context, said Romero. The Civil Rights Department cited the pay data, for example, when it sued Tesla for race discrimination and harassment in February.
The law taking effect Jan. 1 requires employers to add median and mean hourly rate for each demographic group within each job category and include pay data for contractors.
“We are really trying to shine more light on this growing shadow workforce of contract workers,” said Mariko Yoshihara, policy director for the California Employment Lawyers Association, which supported the new law. Google, for example, has more temps and contractors than full-time employees, according to New York Times’ reporting. The new law will reveal how contractors’ pay compares to that of full-time employees, Yoshihara said.
An early version of the new law would have made each company’s pay data public. But after intense pushback from business groups — who said the data is not a reliable measure of pay disparities and that it would “set up employers for public criticism with incomplete, uncontextualized reports and create a false impression of wage discrimination where none may exist” — the bill was amended to keep the reports private.
If companies don’t submit their pay data, the Civil Rights department can take action. It sued Michaels, the craft store chain, and JP Morgan Chase Bank for not submitting the data; both companies settled, paying a combined total of about $23,500 to cover the department’s fees and costs.