CA To Mandate Employers To Disclose Pay-Scale Ranges

CALIFRONIA — Gov. Gavin Newsom on Tuesday signed legislation that will dramatically alter California's hiring process and change the way applicants negotiate pay, according to bill sponsor Sen. Monique Limón (D-Santa Barbara).

Senate Bill 1162 will mandate companies with 15 employers or more to to include pay scales on new job postings and will require employers to furnish pay scales for those currently employed upon request.

"CA has once again shown its dedication to creating a more equitable economy for ALL. Disclosing salary ranges have been proven to narrow the wage gap. We are one step closer to a true #EqualPayCa!" Limón tweeted.

The law will more than likely cast the spotlight on pay gaps between vulnerable groups. Advocates say the new rule could be helpful for women and people of color, who are often subject to lower wages and difficulties negotiating pay.

SB 1162 will also require employers to add median and mean pay gap and contractor pay reporting to the existing SB 973, which requires employers of 100 or more employees to submit pay data reports to the California Department of Fair Employment and Housing and break down aggregate pay data by sex, race and ethnicity in specified job categories.

Last year, women working full time earned 83 percent of what men made, according to the U.S. Bureau of Labor Statistics. The disparities run deeper for Black women and Latinas.

In 2020, women in the U.S. were paid 82 cents for every dollar paid to men and Black women earned just 62 cents on the dollar on average, according to research from the National Partnership for Women and Families.

"These lost wages mean women and their families have less money to support themselves, save and invest for the future, and spend on goods and services. Women, their families, businesses and the economy suffer as a result," according to the report.If signed into law by the governor, employers statewide with 15 employees or more will need to prepare and update record keeping for pay scales ahead of when the law would go into effect on Jan. 1, 2023.

Under the new law, employers will be required to also maintain job title and wage rate history for each employee during their time in the workplace plus three years after the end of their employment, according to the bill's text.

Penalties are steep for those who don't comply and range from $100 to $10,000 per job posting. Penalties will be waived for a first violation if the employer can show all job postings for open positions have been updated to included the workplace range of pay.

New York has a similar bill that is being considered by Gov. Kathy Hochul. If California and New York enact these bills, they will align with Colorado and Washington.

Nearly six in 10 women say they've faced gender or racial discrimination while applying for higher paying jobs, according to a recent survey from a non-partisan data and research firm. And more than half of Black women surveyed by Perry Undem reported that they have faced gender or race discrimination as obstacles to higher pay.

Some 64 percent of women say a reason for the pay gap is "our society puts less value on women-dominated jobs like childcare, teaching and home health aides. Alternatively, 22 percent say the reason is because "women choose jobs that pay less."

But will the mandatory disclosure of pay across California lead to a more equitable workforce? It's complicated.

Zoe Cullen, an assistant professor of economics at Harvard Business School, told the Los Angeles Times that employers are more likely to deny raise requests if they know the salary will eventually become public.

"They have another incentive to bargain aggressively because it helps keep everyone’s wages low," Cullen told the newspaper.

Other advocates say that publicizing salaries could help employers to match applicants' salary expectations with the job market.

"You would never look for a house and not know what the house costs," Beverly Neufeld, president and founder of PowHer New York, told the Los Angeles Times.