California Law Will Require Pay Range in Job Ads

Editor's Note: The California legislature recently passed a pay transparency bill. Gov. Gavin Newsom signed it into law on Sept. 27.

Under the bill, now enacted into law, employers with 15 or more employees will have to include pay range in all of their job postings and publicly report how much certain groups of employees are paid.

"Not only does the bill require employers to report wages for employees across race, gender and position in the company, it also proposes to publish each employer's information on the Internet," said Anthony Zaller, an attorney with Zaller Law Group in El Segundo, Calif. 

HR professionals will need to implement a consistent protocol to ensure that job ads reflect accurate pay scales. "It will be important for HR professionals to have a compliance system in place to review and approve all job ads to ensure they are legally compliant," said Zaller. "It will also be important to have records of the ads placed and retain these records for the time period required by the bill."

That means HR professionals should document pay history for each employee for the duration of their employment plus three years after the employment ends.

This effort toward pay transparency is meant to help employers to detect and avoid discriminatory pay patterns.

It's still unclear whether the proposed law in California will impact salary negotiations with job applicants.

"While it sets a range for the negotiations and gives employees an idea of what the position pays, the ranges could be large, and many employers are currently posting wage expectations to attract qualified employees," Zaller said. "Moreover, California law already prohibits employers from asking employees about prior salary history."

"Job applicants do not apply for jobs simply because the salary range has been disclosed. They apply for jobs where the salary and wages are competitive," said Laura Reathaford, an attorney with the law firm Lathrop GPM in Los Angeles. "Therefore, I think one effect this law will have is that employers may be pressured to offer higher wages because the salaries and wages of their competitors will be more robust and accessible."

Similar Bill in New York

The New York State Legislature recently passed a similar bill that would require employers with four or more employees to include salary ranges in their job ads. Gov. Kathleen Hochul has not signed it yet.

New York City has a similar pay transparency law that will take effect on Nov. 1. The New York City Commission on Human Rights recently released guidance to clarify that the law applies to both internal and external job postings. Bonuses, stock, benefits, overtime pay and commissions are not included as salary.

Although employers in New York City won't be fined if they correct a first violation within 30 days, they may have to pay civil penalties of up to $250,000 for any subsequent violations.

Pay Data Reporting

California's law also will require private employers with 100 or more workers to submit a pay data report to the state's Department of Fair Employment and Housing. The report must include the number of employees by race, ethnicity and sex in these job categories:

• Executive- or senior-level officials and managers.
• First- or mid-level officials and managers.
• Professionals.
• Technicians.
• Sales workers.
• Administrative support workers.
• Craft workers.
• Operatives.
• Laborers and helpers.
• Service workers.

The pay data report also must include the number of employees by race, ethnicity and sex whose annual earnings fall within each of the pay bands used by the U.S. Bureau of Labor Statistics in the Occupational Employment Statistics survey.

Employers with multiple establishments will have to submit a report for each establishment. Failure to provide a report each year could result in a fine of $100 per employee.

The state will publish these annual pay reports on a website that the general public can view.

Ultimately, preventing discrimination is the purpose of this record-keeping.

"The underlying goal is to have employers evaluate any pay disparities within their organization, specifically along racial or gender lines. The law is meant to encourage compliance with equal pay and anti-discrimination laws. If companies and HR professionals keep this goal in mind, the reporting obligation should be less of a concern," Reathaford said.