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What is California’s new pay transparency law?

On Behalf of | Jun 9, 2023 | Employment Law

Workers should not be surprised about their pay when they accept a job, but misleading solicitations have long misled job applicants. To prevent this and to bolster its wage and hour laws, California enacted a pay transparency law that took effect on Jan. 1, 2023. A handful of other states recently enacted similar laws.

Pay transparency law

California employers with at least 15 employees must include pay ranges in their job postings. Current employees are also entitled to pay range information for their positions. Larger employers are required to provide more detailed pay data to the state’s Civil Rights Department.

This law is intended to reduce gender and racial pay range gaps.

Because California is a huge economic center involving many industries, excluding Californians in a remote job listing would be costly to employers. California

Pay ranges

Employers must post the pay ranges for their positions where they will work. Complaint may be filed with the Labor Commissioner’s Office if companies are not posting ranges. Penalties are $100 to $10,000 per violation.   

Companies should also have pay ranges for current employees. Disparities based upon race, gender or other protected class between employees doing substantially similar work are prohibited. Companies should be able to explain why an employee is paid less than the posted range for a similar job.

There has been confusion about how wide the pay range is justifiable. When New York City’s law took effect, there were pay ranges as large as $100,000 between the high and low ends. Reporting

The new law also requires businesses with at least 100 employees to submit reports to the state containing more detailed data on what they pay workers.

This expands a 2020 law requiring employers to submit reports to the California Civil Rights Department detailing how many employees they have in each pay category and pay band identified by gender, race, and ethnicity.

These reports are used in instigations of complaints involving pay discrimination or other civil rights violations against employers. Employers must also add median and mean hourly rates for each demographic group in each job category and pay data for contractors.

Pay data is not public. The Civil Rights Department may impose fines for failure to submit data.