California’s new wage transparency law

The California Equal Pay Act has prohibited an employer from paying its employees less than employees of the opposite sex for equal work for decades. In 2015, Governor Brown signed the California Fair Pay Act, which strengthened the Equal Pay Act in a number of ways and signaled California’s commitment to achieving real race and gender pay equity.  Now, a law that went into effect in January 2023 in California not only prohibits employers from asking applicants for their salary history information, but also requires all employers to provide the applicants the pay scale for the position they are applying for employment upon request.  This law also requires any employer with 15 or more employees to include the compensation figures or pay ranges for the position they advertise in any job posting.  Lawmakers believe the new law will help reduce the gender, race and ethnicity pay gaps. Similar laws are on the books in New York, Colorado and Washington.

Pay ranges

The Act requires employers to include an hourly rate or annual salary in their job postings that is in line with what they would “reasonably expect” to pay to fill the position advertised. Lawmakers hope that the requirement will take the mystery out of job-seeking and make it easier for applicants to compare job opportunities, but experts worry that employers will try to skirt the new wage and hour law by advertising extremely wide pay ranges. When New York introduced its transparency law, similarly ambiguous language allowed employers to advertise pay ranges as large as $100,000. Employers in the Golden State can be just as vague.

Demographic pay ranges

In addition to including pay ranges in job postings, the new law requires employers to calculate the median and mean hourly rates of all of their workers and then sort them according to demographic groups and job categories. Employers in California are required to maintain records of a job title and wage rate history for each employee for the duration of the employment, plus three years after the end of the employment in order for the Labor Commissioner to determine if there is a pattern of wage discrepancy.  If an employer fails to keep records, the law creates a rebuttable presumption in favor of the employee’s claim.  It is hoped that this will help employers and the Labor Commissioner to discover and address inequalities in the workplace. The California Transparency Act is enforced by the Labor Commissioner’s Office or through a civil action under the Private Attorney General Act (known as a PAGA Action) brought by the affected employee or applicant.  Employers that do not abide by its provisions face civil penalties of between $100 and $10,000 per violation.

Enforcement

The success of the law will be determined by how rigorously it is enforced. Employers should not be permitted to advertise pay ranges so wide they provide no useful information, and government agencies should set an example by making their job postings clear and unambiguous.