As many employers are now aware, as of January 1, 2023, employers must now be more forthcoming with job applicants and current employees regarding salary in California. Following in the footsteps of Colorado, New York City, and Washington state, employers in California are required to meet new compliance requirements or face paying a penalty.
The new law, SB 1162, includes expanded responsibilities for employers regarding pay transparency:
- Listing pay scales on job postings;
- Providing pay scale information to existing employees; and
- Increasing record-keeping rules.
Let’s explore some specific requirements of this new law and potential issues to consider.
Pay Range Required in Job Postings
First, SB 1162 requires employers with 15 or more employees to include pay scales on all job postings. For example, when an employer posts on LinkedIn or Indeed to hire a graphic designer, it must now include a pay range of either hourly (e.g., $40-$60 hour) or salary ($40,000-$45,000 yearly) dollar amounts. Companies with less than 15 employees must provide the information upon an applicant’s reasonable request. Companies that hire remote employees from anywhere should also be mindful of this new law (and other existing employment laws in other states, depending on where the employee is located and where business is being conducted). This new law extends to third-party companies that an employer uses to announce, post, publish, or otherwise make known a job posting.
Employers should also note that:
- It is best practice to have a well-reasoned basis for the pay scale;
- The salary range must be a reasonable scale, i.e., an amount the employer is truly willing to pay
- Be mindful of other state (and sometimes, city) wage laws when setting minimum salaries for a pay scale.
- If the employer is hiring for multiple locales, and the cost of living varies, the employer should consider whether a different pay scale needs to be listed for each region/location.
Failure to comply with the law could result in the Labor Commissioner ordering a penalty ranging from $100-$10,000 per violation (although, under this new law, no penalty will be assessed for a first violation where the employer demonstrates all job postings for open positions have been updated to include the required pay scale).
Pay Transparency for Current Employees
The second responsibility employers now have is to provide pay scale information to current employees upon request, regardless of business size. Legitimate business reasons indicating the employer’s rationale for salary determinations for each employee may help justify differences in pay.
Investigator’s Note: Pay transparency laws could bring about an increase in complaints from existing employees about pay inequity and possibly discrimination. Given the job posting will likely be public, current employees may now be able to easily review and compare their salary to those being advertised for substantially similar work at their company. For example, a current employee doing substantially similar work that a company is recruiting for may question salary differences, particularly if that employee is being paid less than what is being advertised for the new job.
If these complaints arise, conducting a workplace investigation may be beneficial. The more information a company has about a situation, the better it can evaluate appropriate next steps. It also creates a better workplace environment for employees when they feel validated and see problems resolved swiftly. A neutral, third-party, external workplace investigator can provide valuable insight.
Record-Keeping Requirements
Record-keeping is the third area of expanded responsibility for employers, which is especially important with an eye toward potential investigations. Employers must now maintain all employee pay history throughout their employment and for three years after the employment relationship ends.
Failure to comply means an employer could face heavy consequences, including a presumption in favor of the employee’s claim that the employer violated the Labor Code.
In Summary
Under the new law, prospective and current employees will now have more access to a potential or current employer’s salary information. Having processes in place can help ensure compliance.
For assistance with a workplace investigation, reach out to us! We are here to help and are happy to discuss your particular situation.
Disclaimer: The content of this post is for informational purposes only and does not constitute legal advice. It shall not be construed as an offer to represent you, nor is it intended to create, nor shall the receipt of such information constitute, an attorney-client relationship. We hope that you will find the information informative and useful, and we would be delighted to speak with you to answer any questions you may have about our firm.