What Employers Need to Know About Pay Legislation

On September 27, 2022, California Governor Newsom signed into law Senate Bill 1162, a groundbreaking pay transparency bill that will have a direct impact on employers and employees across the state. As of January 1, 2023, California will join Colorado, Washington, New York City and other municipalities by requiring employers of 15 or more employees to include salary ranges in all job postings. New York City’s pay legislation goes into effect two months earlier, on November 1, 2022.

In our latest episode, we talk to Noreen Farrell about the rapidly evolving landscape of pay legislation — and what employers need to know. Noreen is the Executive Director of Equal Rights Advocates, one of the nation's leading legal nonprofits advocating for women and girls at work and school. Among many other awards, Noreen was recently named a top Legal Innovator in Law and one of the Top 100 Women Lawyers in California.

This blog is adapted from that conversation and covers:

• Pay transparency legislation today
  How this pay legislation is poised to close pay gaps
• The future of pay transparency legislation
  
  

To hear the full episode, visit this page, or subscribe to the show on your favorite podcast player, such as Apple Podcasts or Spotify.

Don’t miss the full episode: What Employers Need to Know About Pay Transparency Legislation

What’s going on in pay legislation today

While pay equity laws have existed for fifty years, the gender pay gap has persisted. Noreen says this is because many employers and employees aren’t aware that a pay gap exists.

You cannot fix what you don’t know is broken.

The efforts made in pay transparency today, including the most recent enactment of California’s Senate Bill 1162, reveal pay gaps that otherwise would have gone unnoticed.

Senate Bill 1162 expands existing pay transparency bills by requiring all companies with more than 15 employees to include pay scales or salary ranges in job postings. Four states have previously done something similar by offering this information upon request. However, it has been shown that marginalized communities are less likely to request this information.

When organizations are required to provide salary ranges in a job posting, any potential existing pay gap is revealed. Further, California has mandated that organizations provide a salary range to existing employees for their current position.

When pay ranges are transparent, pay becomes democratized. Employees are enabled to recognize any inequities and address them with organizational leadership.

How this new pay legislation is poised to close pay gaps

Democratizing pay by providing pay scales to current and prospective employees is a strong move in the right direction. As people and organizations become more aware of discrepancies, leaders can make changes to close pay gaps.

But, as organizations like Equal Rights Activists dive into the specific categorized data around the new pay legislation, there are many other opportunities to create true pay equity through adherence to the law.

The new pay legislation also requires companies with 100 or more employees to report annual pay data. They must include the median and mean hourly rates for race, ethnicity and sex within each job category and submit their report to California's civil rights department. This enables an understanding of whether and where certain workers are being over-represented in the pay scale. Therefore, it reveals whether equal pay for similar work is being provided.

Bill 1162 also expands efforts to protect contractors alongside full-time employees. Starting in 2023, private employers with 100 or more employees hired through labor contractors must also submit a separate pay data report. In addition, they will be required to disclose the ownership from which they hire contractors and the names of all the labor contractors used. This ensures that the pay data for all employed individuals is reported, regardless of how they are contracted.

Incoming trends in pay transparency legislation

States like California, New York, and Colorado are pioneering the way to an equitable work environment. But, according to Noreen, there’s much more to come. These leaders will continue to push forward toward closing pay gaps, and eventually, the rest of the country will follow suit.

“This is a moment for companies that want to show up for women and other workers that have been historically marginalized across the economic sector,” Noreen says. “There are so many hidden costs to not being transparent. It's going to be much cheaper to comply with the law in advance than paying penalties, facing pay discrimination suits, and suffering the loss of great candidates.”

Instead of making changes as laws are enacted, businesses will begin to tackle the challenge of closing pay gaps on the front end. As data is analyzed, organizations will inevitably get behind transparency trends.

Better yet, Noreen expects other states to follow the example of California and other pay-equity pioneers, enacting legislation ensuring pay equity for all employees across the nation.

To hear this episode, and many more like it, you can subscribe to The High Growth Matters Podcast on our website, Apple Podcasts, Spotify, or just search for The High Growth Matters Podcast in your favorite podcast player.