Job postings in California will soon include salary ranges thanks to a new salary transparency bill signed into law by Gov. Gavin Newsom on Tuesday.
The law, which goes into effect on January 1, 2023, will require nearly 200,000 companies with 15 or more employees to begin disclosing salary ranges in advertisements for jobs held in the state. The move makes California the largest state where job postings require salary information by law. It’s home to 19 million workers and some of the most influential companies in the world, including Apple, Disney, Google and Meta.
Supporters of the law say it’s a big step forward in closing racial and gender pay gaps.
Nationally, the US Census Bureau estimates that women earn 82 cents for every dollar a man makes, and the gap is widening for many women of color.
In California, women get about 88 cents for every dollar paid to a man, with the gap widening for women of color. According to the National Partnership for Women and Families, women in the state lose a total of $87 billion each year to the pay gap.
“Women, and women of color in particular, are literally robbed of their wages every year,” says Jessica Ramey Stender, policy director and deputy legal director at Equal Rights Advocates, a nonprofit legal and advocacy organization that co-sponsored the payroll.
“That’s money that could be used for rent, food, diapers, education, retirement plans. So it really is time to develop strong pay equity legislation here in California and beyond.”
Stender believes the California law will push other states and cities to follow it.
More transparency beyond salary ranges
In addition to requiring salary ranges, the new law requires employers of all sizes to tell an employee the salary range for the position they hold if they ask for it. This means job seekers aren’t the only ones who benefit from greater pay transparency – existing employees can check where their pay sits within their own organization and raise pay discrepancies for negotiation or requesting an adjustment.
Finally, companies with 100 or more workers who are hired through outside recruitment agencies, who often perform time-based jobs as W-2 contractors, are required to submit payroll data reports for those workers to the California Civil Rights Agency. broken down by gender, race and ethnicity.
According to Stender, this “growing segment of the modern workforce” is often made up of women and people of color who do the same work as direct employees for less pay. Reporting salary data based on job and demographic background can help uncover occupational segregation that employers may not be aware of.
“We believe this data can help companies comply with equal pay and anti-discrimination laws and create a more equitable workplace,” says Stender.
Suppose a company uses the data to find out that its administrative staff, hired through a recruitment agency, is 95% female, while its managerial staff hired directly into the company is 95% male. If there’s a need to collect that data, “it should be a huge eye-opener that they have a potential discrimination claim on their hands,” says Stender.
Previous California law required companies with 100 or more direct employees to report job and demographic data for those employees.
Payroll data doesn’t have to be released publicly, but Stender says the state agency is likely to release aggregated data for public awareness and accountability. The effort “also gives law enforcement agencies data to better enforce equal pay and anti-discrimination laws,” she says.
The Impact in California and Beyond
Similar laws exist elsewhere in the US and are gaining momentum.
Colorado’s Equal Pay for Equal Work Act went into effect in January 2021 and requires employers to disclose the pay range in all job listings. Early data suggests the change resulted in more people finding jobs in the state, despite a drop in employer listings.
Nevada employers are required to automatically provide applicants with the salary range after an initial interview, even if the applicant did not ask for it. Connecticut employers are required to provide the salary range when an applicant asks for it or when the employer makes an offer. And in Washington, employers are required to provide the minimum and maximum salary range for a job after making an offer and when the candidate asks for it.
New York City passed its own pay transparency law, which was due to go into effect in May, but it was pushed back to November in large part due to opposition from business groups.
The New York state legislature passed similar legislation in June. It now sits with Gov. Kathy Hochul, a Democrat, and could go into effect next year, 270 days after it was signed. New York business groups have pushed back the legislation, asking the governor to amend it to remove a requirement to list employee benefits and create exceptions for jobs that can be done remotely, among other things.
Now that California law has been signed into law, Stender expects no changes to the Jan. 1 implementation date.
“If you had to make an effort to do that, it would have to be done through new legislation, and that wouldn’t be done in the time required” to prevent the law from going into effect in January, she says.
And because so many global and national companies are based in California, Stender says the new law is already having major implications beyond state lines.
Companies with locations across the country and internationally sometimes change their policies across the board when legislation like this is enacted, she says, to ensure they’re compliant where it’s needed, and even in some places where it is is not the case.
Employers are preparing for salary transparency, even if it is not required by law
According to a Willis Towers Watson survey of 388 executives conducted in June and July, 17% of companies say they disclose salary range information in parts of the US where it is not required by law. And a majority, 62%, of companies plan or consider disclosing salary ranges in the future, even when not required by law.
Workers today expect a higher level of wage transparency: 66% of job seekers expect wages to be included in the job description, according to a June Gartner poll of more than 3,600 people.
“Companies have received many warnings that this is the direction we are headed,” Jamie Kohn, director of Gartner’s HR practice, told CNBC Make It in August. that it works and have tried to find the best way to make it happen.”
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