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California’s New Law to Expand Pay Transparency Requirements: Beginning January 1, 2023, employers in California will be subject to several new requirements aimed at promoting pay scale transparency and equity. Learn more in this Law Alert reposted from Mineral (trustmineral.com)
Beginning January 1, 2023, employers in California will be subject to several new requirements aimed at promoting pay equity, as follows:
The intent of the requirement to post pay scales in job postings is to promote pay equity and to help close the wage gap for those who are disadvantaged in the job market through no fault of their own. While the approach may feel drastic to private employers, it has been used successfully in the public sector for many years. In fact, after the initial rough patch (which may require a fair bit of work from employers who lack documentation around their pay structure), these pay transparency requirements are likely to streamline hiring, compensation, and talent development processes and make your business run more efficiently. And in 2023, it’s estimated that 25% of all private employers will be required to post pay ranges with their job ads.
You should anticipate that employees will start asking about their own pay ranges and that they’ll see your job ads and react to the pay scales provided there as well.
If the ranges you post in ads or provide to current employees when asked seem too wide, they may think you’re providing bogus information. This will breed distrust and could potentially lead to employees reporting you. Or they may wonder who among them makes that little or that much, and why. If the ranges are reasonable but you have current employees outside of those ranges, that will likely lead to some immediate feedback.
In many cases, employees will begin discussing this new information with their coworkers. Discussing wages is protected by both federal and California law, so employers should not attempt to stop or prevent these conversations or punish employees for having them. The result of this sharing may be that employees discover one-off or systematic pay inequality, in which case you may have issues with morale, turnover, union organizing, or lawsuits. Even if your pay choices are perfectly logical across the board, employees will not necessarily know or understand why they are paid less than a coworker whom they consider their equal, and you should be prepared to explain those discrepancies.
Don’t panic. If you don’t have documented pay ranges, start working on them—you have three months to get your systems in order. You may want to consider hiring outside help if you don’t already have a basic, defensible pay structure and fairly comprehensive job descriptions.
If you are preparing for this on your own, here are some tips:
A lot of the above may seem obvious, but if your systems aren’t written down anywhere (and shared with those who will be asked the questions), you will likely run into issues answering employees’ questions about your pay structure. Additionally, having clear documentation of the legitimate reasons for each employee’s wage rate will be useful if you find yourself in any pay equity litigation. To that end, we recommend using the next three months as best you can to thoroughly document, document, document, and prepare for new challenges in 2023.
For questions, you may reach out to your HR consulting manager with M&G at any time. Clients will be provided with more information as it comes available.