What Employers Need to Know About Pay Legislation

ON THIS EPISODE OF HIGH GROWTH MATTERS

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 this 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.

Join us as we discuss:

• What’s going on in pay transparency legislation today
• How this pay legislation is poised to close pay gaps
• What’s on the horizon for pay legislation and what trends are coming

Check out these resources from the show:

• https://www.equalrights.org/
• Listeners can join OPEN Imperative and get a free pay equity report at https://www/openimperative.org
• https://www.opencomp.com/blog/what-businesses-need-to-know-about-california-new-pay-transparency-legislation

LISTEN TO THE EPISODE

TRANSCRIPT

CAITLIN ALLEN: Welcome everyone to the official high growth matters podcast. I am Caitlin Allen, your co host and the VP of marketing of open comp. Today we talk to Noreen Farrell, about the rapidly evolving landscape of pay transparency legislation and what employers need to know, which is not necessarily a simple thing. Noreen is the executive director of the Equal Rights Advocates, one of the nation's leading legal nonprofits advocating for women and girls at work in school. And among many other awards, she was recently named a top legal innovator in law and one of the top 100 Women Lawyers in California. Noreen, thank you so much for being here.

NOREEN FARRELL: Hi, thanks so much for having me. Really looking forward

CAITLIN ALLEN: to this. So we start off our conversations on a personal note, just so the audience can get to know you. And that first question is diving into what's something most people don't know about you?

Sign up for OpenComp's compensation benchmarking for free:

NOREEN FARRELL: Um, well, um, you know, over my career, I've done I've done a lot of jobs, I've run cases, pay equity cases, all the way up to the Supreme Court, I've probably pushed about, you know, four times the number of great bills, and I've actually succeeded. And I dive deep into my past in a band called Phoenix High School, where were the mythical bird rising out of the ashes, that was the name of our band, and I channeled that image and that, you know, that sentiment that, you know, you have to do that with gender justice, you don't always get it on the first time. But we keep rising up and learning and learning from our partners like open open comp and companies about how we can make pick pay equity. And you know, the other things we're seeking in terms of our worker reality.

CAITLIN ALLEN: Yeah, it's a mix of persistence and resilience. And well, great, let's dive into the topic at hand about what you were an expert. So what is going on today, in the paid transparency legislation landscape?

NOREEN FARRELL: Well, you know, kind of in that spirit of the Phoenix coming out of the ashes, you know, there's just there's been a lot, you know, we've had these pay equity laws on the books for 50 plus years now. And I think the number one lesson that we have learned in terms of looking at the sort of stubborn persistence of the gender pay gap that can't be explained by other factors is that companies and workers can't fix a pay gap that they don't know that they don't track that they don't see. And so this trend in terms of pay transparency legislation, I think, is really exciting. And I think it's really going to help both employers and workers to get at and track and adjust, you know, throughout the year, issues that they're seeing in terms of their pay equity. We just had a great win in California, Senate Bill 1162, which was authored by Senator Monique Limone was just signed by the governor, equal rights advocates was a co sponsor of that bill, along with the California Employment Lawyers Association, and a couple of other great partners. And it expands patriots existing paid transparency bills, and I'll tell you a little bit about what it does. It's one of the bills that would require employers who have 15 or more employees to include pay to pay scales, salary ranges in all of their job postings, and it does a couple of other things. But let me put it in the context. It's follows a couple of other states that did this first in Colorado excetera. You know, there's probably about I think we're about four states and five or six cities that have been doing different kinds of pay transparency bills. But I think and they've taken a different approach. Most of them like California started by making sure that employers give applicants a pay scale, if they request one, while being interviewed. And what happened in California, and happened in among a number of other states is that applicants weren't asking for the pay scale, they didn't know that they could or they were intimidated. And so now more locations are taking a different approach, either by requiring employers to proactively give the information to candidates during the hiring process or being you know, more proactive and requiring that the information be posted publicly. And and then California takes it a bit further by saying that current employees can ask for pay scales for their current positions. I think that this what's important about this California Bill is that look, we're the fifth biggest economy in the world. There are more employees and employers in California than in any other state. And I do think it's a tipping point in terms of what employers are looking at in terms of this trend of patrons paramountcy,

CAITLIN ALLEN: it's really well said it the size of the state the influence of the state. I also think that it the fact that California is doing this paired with cities like New York, they tend to be leaders. So really, really exciting. Yeah. You alluded to this in terms of just the fact that this legislation is poised to close, close pay gaps, because effectively it democratizes information. What what is the impact been to date of legislation in states like Washington or Colorado, cities, like New York, I guess, are about to be in effect?

NOREEN FARRELL: Well, we actually had some really good data that came out of our initial pay transparency bill, which was about providing the the salary scales to applicants upon request. We had a study, we we in California, through that early legislation required reporting of pay data to our State Civil Rights Commission. And through that data, which is aggregate data from employers of all employers, we really found some compelling results, and that we found that lat Latina and black workers were over represented in the state's lowest pay bands. So the provision of the data to the state agencies really helps us see not just you know, whether or not there's equal pay for similar work, but where are you know, where are certain workers being over represented in terms of pay scales, so that was really important. You know, we have seen these bills in other states being being implemented. We're probably in the early stage in terms of research. But we are anticipating that the data will show what's happened in workplaces where there are other kinds of pay transparency, like unionized workplaces, where they're paid pays, or government jobs where the the pay scales are posted, they tend to have smaller pay gaps. So this is the expectation that's flowing out of all of these. And I think what we're seeing is just bills that are really sensing the gaps in earlier legislation and trying to fill them very much in conversation with HR professionals and companies. I'm here in California, we you know, we have great partners like Salesforce, like open comp, that are that are really thinking about this before the legislation arrives. And it's really informed I think, some of the nuances that you see in the California bill, which I can tell you a little bit about, but I think that I think it's this is a moment of the great resignation, Caitlin, everyone's leaving job looking for new jobs. And so companies that are staying on top of what how their pay scales are faring as compared to others. Being able to assess internally what's going on in terms of gaps and fixing those before those are made public. I think it's I think it's I think we're here, I think the future has arrived in terms of transparency.

CAITLIN ALLEN: So true. And that was a great, great TF. Thank you. I would love to understand what companies and states with pay transparency legislation now report on we need to now report on we can start with maybe California.

NOREEN FARRELL: Yeah, I'll start with California and try to weave in where I know, similar provisions are in different states. So as I mentioned, most of the pay legislation is applying to employers with 15 or more employees. And, you know, I'm I run a small nonprofit equal rights advocates and we have over 20 employees. So it's a it will apply to small businesses, and we've always posted Well, I can't say we've always posted our pay scales, but we started to before the law required it. And so you know, even even even small, you know, employers like myself are really thinking through how to how to implement the law to its to its last tee, and in in California. As I mentioned, employers need of any size need to provide current employees with pay skills of positions that they currently hold. We already know that in California private employers with 100 or more employees, they are required by existing law to report annual pay data, but it now needs to include the median and mean hourly rates for race race. ethnicity and sex within each job category to our state's civil rights department. And this is an important piece, starting in 2023, private employers with 100 or more employees hired through labor contractors must also submit a separate pay data report to our state agency. And they have to disclose the ownership names of all the labor contractors that are used to supply employees. And this is important because so many employees now you know, mine others, we do use con contractor employees for special projects. And so this just makes sure that anybody who is being employed through whatever means by a company is, is having their PII data analyzed. You know, there's, there's, there's a couple of other provisions that that matter. And but I think the pay data reports will not be publicly accessible in California. That was, that's something that's on the table in other in other states right now, I do think if you were to ask me where it's going, that that's probably where it's going. But I think the thought was, look, let's just get this to be a really robust, healthy internal process or process with, with guidance from external vendors like open comp and others to let let let companies for, you know, the next couple of years really, you know, get in the practice of auditing examining their data, we're working with state agencies to to look at trends and to address that. And so we're really hopeful. But I do think that that is likely the trend in terms of future pay transparency, legislation.

Use OpenComp's comp tool for free:

CAITLIN ALLEN: It's really exciting. And I do want to get into the future in a later part of this conversation, because it's 100%. Very important. At two things are coming to mind or in one, what you said about how your your company is posting pay ranges, what I think this is such a wonderful moment to do is to apply company values like your company is doing, right, we have given a lot of lip service as employers for years about the values we placed on diversity, equity and inclusion. And this is a moment to really show our teams that, that we actually put our practice where our philosophy is. So thank you for leading the way there. And then the other thing that was coming to mind, while you were speaking, I did some quick math a couple days ago about just the penalties for companies in California if they're not compliant. And for every 100 job postings that are open at a company that the low end is only $10,000. But the high end is 100,000. And it's really like, although you don't sometimes, you know, having a stick is maybe not the way to evoke change, like you hope people do it for aspirational reasons. I'm really thrilled in a way that that is there, because it's going to usher in that change that you're talking about where this is really the tipping moment.

NOREEN FARRELL: Look, I think that so many employers, thank you for that math calculation. So many employers are doing that right now. And we need to incentivize employers to really look at this at the front end, it's going to be a lot, a lot cheaper to, to work on complying with the law in advance than paying the penalties and also facing potential pay discrimination suits. The loss of great candidates that cost so much money these long is long hiring processes that many of us are going through, you know, these are there's so many hidden costs, so not being transparent. And, you know, they don't just float directly out of fines for this, these violations. And I think that I think you're right, I think that this is a moment for companies that, you know, so many companies that we talked to, they want to show up for women and other workers that have been historically, you know, marginalized, maybe not by them, but historically across the, you know, the economic sector sector. And you know, what we do know, there's been some great studies about what, what, what applicants feel when there are job postings and one study, there was, indeed did a great survey. I don't know if you've seen it. They did a survey I think about 1500 applicants, which is a pretty healthy size. And we have seen this in terms of other surveys we've seen 75% said they're more likely to apply for a job if the salary range is listed. 56% are more likely to apply to a company whose name they don't recognize if the salary is listed. And so when you think about you know, all the great new startups that are happening and new businesses that are arising in you know, in the upcoming years because that can help you attract candidates even if they don't know your name, as well as a, you know, a Microsoft or whatever kind of company, which by the way Microsoft is do as doing patrons, parents across all of its states state locations, and just sort of survey that 62% of companies are thinking about doing this voluntarily in states where the law doesn't require it yet. So I think that it's not just about reflecting your values, it's now you're in good company. Now, there's not a market advantage to secrecy. I think these kinds of laws help level the playing field in terms of transparency. And I think one of the big things I hear is, oh, I want to, I want to keep things secret, because it's a market advantage. Now, it's required by everyone. And you should rise or fall on your ability to be competitive with public salary postings.

CAITLIN ALLEN: Really well said, I think also, it potentially could usher in an era of better financial planning, since ranges are the foundation for so much of financial budgeting and forecasting. So that's something that I'm, I think, could potentially be a side benefit as well. And when

NOREEN FARRELL: you think that you're, you're absolutely right, we are definitely seeing that. And that's, you know, when you hire someone, you have no idea if you're gonna have to pay them double the, you know, double what you were thinking, it just wrecks havoc, especially as people are trying to plan for investments in other parts of their companies. So I think that is a really important benefit of of these kind of laws, forcing folks to budget for

CAITLIN ALLEN: them. 100% So you and your team, Noreen, have interviewed many employers from what I understand about how they're getting prepared for new students Legislation in California. Can you share with us what some of the things are that you and your team have learned?

NOREEN FARRELL: Yeah, I mean, I think I think that one, I am hearing this idea of budgeting, right, in thinking about incorporating these decisions in budgeting. And really, more employers are really reviewing their compensation practices, right. Because, you know, in the old days, you know, and I've been in the workplace for a long time, there's a lot of discretion that were given to, you know, managers at different levels in different locations and different departments. And this is really, I think, inspiring employees to look at their compensation policies, make sure that there's consistent, consistent, consistent to them across positions and groups. They are implementing pay equity audits. And, and they're, they're really, they're really eager to do it in a way that's very consistent and fair. And they're doing it more regularly. It used to be you know, you do these audits once every five years. And you kind of like what you see you stop there, right. But we're hearing from Florida employers, they understand the need to be doing this consistently and doing it around bonus times and doing it as they're doing evaluations and merits. And I think fortunately, now, there's such great technology through open comp and others that, that really let them do that very easily, you know, through technology, I see more employers that are reviewing their hiring practices, they're being more thoughtful about what's happening in terms of using both headhunters and contracting companies. Because you know, that information can skew what's happening at hiring pay, which was a big, a big issue or big place where I think HR professionals were finding where disparities started. And so I see employers just being more cognizant and aware of how working with third parties can skew their hiring, pay ranges. We are, you know, seeing more people ask for help about their recruitment procedures. And, you know, it's just a it's just a better intentionality about the entire experience of their of their, their workers from what they see when they see that posting to what they're told in the hiring interview, to what they know they can receive. If they're if they're a long standing employee that wants to make sure that they're, they've their salaries kept up with their seniority. And I love your point, Caitlin, about it. You know, I think this helps people at the end of their careers as well, in terms of thinking about what am I going to have in my nest egg? You know, I see more companies caring and talking about helping employees build their own wealth and financial literacy and all those things. And so this, this transparency of numbers, I think, has shifted the culture in in ways that go beyond just pay equity.

CAITLIN ALLEN: I love it. And that personally makes me so happy because financial literacy was something I had to self teach in my 20s and one of the things we do With our girls once a week when we give them their allowance is show them their college funds in the index fund. So they start to learn what's happening as it goes up, up and down. And anyways, it's it's a personal area of passion for me. So I love that you connected the dots for us.

NOREEN FARRELL: I love that. Caitlin that's so true. That's so true about you know, not just women workers, but workers that didn't come from families with a lot of wealth. You know, we're we're, you know, we're fostering a new generation of people that are, you know, want to make money with their money and having having having fair wages in their pocket and their sense that that's true. Really helps. So,

CAITLIN ALLEN: so it was so well said Noreen set. Last question. Before we get into what the future looks like. The the state of California recently released its first annual pay data report, and it had some compelling findings. Would you share with us what some of those were?

NOREEN FARRELL: Well, I mentioned earlier this, this, this finding that we know that workers of color, particularly black, and Latino workers are most definitely in the over represented in the lowest paid scales. And that's, and that's really compelling, because that is consistently true in most companies. And it's not just a function of, you know, necessarily, you know, discrimination or, you know, it could be and, and there are plenty of, you know, great partners like open compact can help you discern that. There's, you know, there's there's issues about recruitment, and what happens when you don't have people of color on your hiring team, do people take those jobs? So it's, it's, it's, it's data that is very significant coming out of this. And we're going to continue to analyze that. Because we, of course, know that women and women of color are really the intersection where pay inequities and over segregation and lowest paid jobs are harming the most. And, you know, we can only I think we're going to continue to learn from this from this aggregate data in ways that I think will be helpful to all companies across the country.

6K customers love OpenComp's compensation benchmarking tool - free!

CAITLIN ALLEN: As you said earlier, we're just getting started on that front. Yeah. Now, so in terms of what's on the horizon, you've alluded to some of this earlier, do you have any guesses as to what states or cities might introduce new legislation next, you know, what trends are coming?

NOREEN FARRELL: Well, I think it's important to look at where some of these jurisdictions are, where pay transparents happening. They're not where you think, you know, I think there's now two cities in Ohio, Cincinnati, and Toledo, Toledo, that have paid transparency laws. We're so we're seeing we're seeing pay transparency laws in blue, purple and red states. And I think that that is really speaking to the to the issue that this really gets bipartisan support, I think And speaking of sort of the purples, I think we can expect a couple of states. I think Pennsylvania legislatures are considering pay transparency bills, which will be really interesting, because that's a that's an important Bellwether state for a lot of workplace equity issues. Massachusetts is considering pay transparency. And we know that South Carolina is considering legislation. So we have, again, lots of cities. This is a place where we've seen you know, employers really need to be looking out like the jurisdictions, the cities, New York City, these are getting a lot of attention and tend to be levers for statewide legislative legislation. So all of our employer partners should be looking at cities as well as states in terms of what's going to be happening next.

CAITLIN ALLEN: Wonderful, thank you. You're on the open imperative board, which is something that that we have been able to work on together, Noreen and as we close out, I would love if you could give us a quick summary of how how, what your listeners know about what open imperative is and how it might be able to help them.

NOREEN FARRELL: You know, I the number one thing that I've heard in my tool and 30 plus 25 years of doing justice work is I want to do it but I don't know how to do it, or it feels overwhelming or it feels too expensive or it feels you know, especially and I also run a small business, right. I understand that. There are real barriers sometimes to companies that really want to do the best thing they want to come was the law. And so for me to be an advisor on a tool, you know, and to be in community with folks that are thinking about tools to help employers do the right thing so that employees and workers get their fair wages. It's just really an exciting opportunity. And for me, it is a learning space. And I believe, you know, the company members will feel it would say the same thing. It's a learning space, we're thinking about obstacles, we're thinking about trends, we're thinking about what we should do in this state when it's different than this state. And it's helping us all be better. It's helping you know, me as an advocate be better. It's it's bringing the attention and needs of workers to the community. And it's also bringing back to legislators and advocates. What are the what are the what are the obstacles for, you know, for companies that are trying to comply with the law? And so I do you think that we have this moment, I really think it's a tipping point where the law is clear, I think that creates a lot that makes it really much easier for workers and for employers. The technology is here to help companies be tracking, you know, all sorts of, you know, compensation data. And I think that nationwide, it's what consumers want, as well. They want to see companies living their values, and their know, they're using their pocketbook to influence that. And so it's a really great time to create this community about compensation equity, and I'm really very proud to be part of it. And I look forward to more great work ahead.

CAITLIN ALLEN: Yes, it's likewise, it's one of the reasons I love getting up in the morning. And for those who are listening, open imperative is something you can join for free. And if you do, you can also get a free pay equity report, which is one of the tools that Noreen mentioned earlier. So normally, we ask the same question to close out every podcast, which is, in this case, a very difficult one. What do you think is the most important thing that our listeners HR leaders should remember from what you've said today?

NOREEN FARRELL: I think obviously, take some time to learn the law. really embrace what it's trying to do and the clarity that it's it's offering employers in terms of moving forward and use this as a tremendous opportunity to show your workers and your customers the values that you that you hold in terms of equity in your workplace. And we're here equal rights advocates is here at Oakland compass here. There's plenty of partners here that want to lift up, and and celebrate all of your efforts. We have an Equal Pay Day campaign. And we lift up highroad employers all year and so there's ways that all your great efforts can be celebrated by a broader community. 100 million people participated last year. And so if folks are interested in joining our corporate championship circle, they should reach out to me. Thank you so much to everyone who is doing their very best to breathe life into these really important loss.

CAITLIN ALLEN: Thank you. And to all those listening, the way to get in touch with Noreen as well as the Equal Rights Advocates website will be in our show notes. So just look below there. And thank you so much. This has been wonderful and for listeners. Thank you for being here.

NOREEN FARRELL: Thanks so much.