What California’s New Wage Transparency Law Means for You

California’s new salary transparency law has been passed. The nature of the law means that there are big implications for organizations both inside and outside of California. The time to prepare and adapt is now, as the law came into effect on Jan. 1, 2023.

In a recent webinar, experts from inside and outside Salary.com walk you through the different effects that this law will have on your organization. As well as this, they offer their advice on how you can prepare and be in the best possible position to comply. With that being said, here are some of the things you need to take into account and prepare for in relation to the new California salary transparency law.

What Does the California Salary Transparency Law Require You to Do?

The new California salary transparency law has some very specific requirements. These requirements are associated with pay disclosure, record retention, and pay gap reporting. Here is an overview of the new laws.

Pay Disclosure

• The bill would require an employer with 15-plus employees to include the pay scale for a position in any job posting.
• “Pay scale” means the salary or hourly wage range that the employer reasonably expects to pay for the position.
• California already requires an employer, upon request, to provide an employee with the pay scale in which the employee is currently employed.

Heather Bussing, Employment Attorney & HR Analyst, explains that “not any pay range will do to comply with this, you’ll have to give a range in good faith for what this role will be paid by you in reality.”

Record Retention

• Employers will be required to maintain the job title and wage rate history for each employee for the duration of the employment plus three years after the end of the employment.
• These records are open to inspection by the California Labor Commissioner.
• There is a rebuttable presumption in favor of an employee’s claim if an employer fails to keep records in violation of these provisions.

California Pay Gap Reporting

• Median and Mean pay gap will need to be reported based on W2 earnings for each EEO-1 category.
• The median pay gap will need to compare the midpoints to determine difference in pay by race and gender.
• The mean pay gap will need to compare the overall average pay to determine difference in pay by race and gender.

When Does the California Salary Transparency Law Come into Effect?

There are a couple of key dates you need to know in relation to the California salary transparency law. These dates involve different areas of your pay transparency that you need to report. Here is an overview of the important dates and what you need to do:

Jan. 1, 2023 – Pay Disclosures and Record Retention

• On this day, your organization will need to proactively disclose the salary of employees if they have 15+ employees and/or 1+ employees in California.
• It also applies to reactive disclosure upon request to employees if you have 1+ employees in California.

May 10, 2023 – Annual Pay Gap Report; Contractor Pay Report

• Annual Pay Gap Report needs to include the mean and median for each combination of race, ethnicity, and gender for each EEO-1 job category. This applies to organizations with 100+ employees (1+ in California), based on 2022 hours and wage data.
• Contractor Pay Report needs to be an annual pay gap report including the mean and median for each combination of race, ethnicity, and gender for each EEO-1 job category. This applies to organizations with 100+ labor contractors, based on 2022 pay data.

Before worrying about these dates, look closely and ensure that the new laws apply to your organization. Heather Bussing shares her view on contractor pay reports:

“Contractor is confusing, a lot of people have been calling me and asking about independent contractors and that’s not what this covers. It covers employees that you hire through staffing agencies.”

Why Do You Need to Comply with the Law?

Failing to comply with the California salary transparency law can land you in hot water. There are some penalties that can occur to your organization if you fail to comply. Here are a couple of examples of the pay reporting penalties that can occur:

Failure to File Pay Demographics Report

• A civil penalty not to exceed $100 per employee for failure to file the required report. Subsequent failure can lead to up to $200 per employee.
• Failing to provide the pay data to an employer as a labor contractor can also make you liable.

Failure to Post Salary Ranges in Job Postings

• Civil penalty of no less than $100 and no more than $10,000 per violation
• For a first violation, no penalty shall be assessed upon demonstration by the employer that all job postings for open positions have been updated to include the pay scale as required by this section.

What’s Happening in Other States?

Wage transparency laws aren’t just happening in California. There is also new legislation requiring wage range disclosures in states including Connecticut, Colorado, Maryland, Nevada, New York, Rhode Island, and Washington. Other states have similar bills in the works which means that pay transparency is becoming a hot topic all over the country.

There are various approaches among some of the states mentioned. The trend seems to require pay disclosures for job applicants, employees, and upon request. Disclosure in job postings is also required by states including California, Colorado, and Washington, and in municipalities such as New York City.

Find Out More by Watching the Webinar

As the new California pay transparency law comes into effect, it is vital for all organizations to prepare. If you want to find out more about the changes, watch our webinar on the topic. You can watch our on-demand webinar here.