Navigating CA Pay Transparency Laws and Reducing Legal Risks - Allevity

The push for pay transparency has been growing across the United States, with many states working to close the gender and racial pay gap. California leads the way, introducing new pay transparency laws in 2023 that require employers to share salary ranges in job postings. 

If companies don’t follow these rules, they could face lawsuits and legal trouble. This blog post will explain the importance of pay transparency, the legal risks involved, and how to stay compliant with California’s new laws.

Pay Transparency Law in CA: What You Need to Know

California’s new pay transparency laws require employers to include salary ranges in job postings to promote fair pay and reduce pay differences between people of different backgrounds. These laws build on the California Equal Pay Act, which says that employers can’t pay employees of different genders, races, or ethnicities less for doing similar work.

There are some parameters that explain who pay transparency compliance affects. According to SHRM:

The Labor Commissioner interprets the 15-employee threshold to apply when: 1) an employer reaches 15 employees at any point in a pay period, and 2) at least one employee is currently located in California. If an employer has more than one facility, all employees are counted, as well as out-of-state employees, for purposes of making this calculation.

Companies that don’t follow these laws could face fines, lawsuits, and damage to their reputation. They might also be at risk for class-action lawsuits, where many employees join together to seek compensation for unfair pay practices. Many legal firms and attorneys are now actively parsing through thousands of job post boards just to try to find postings out of compliance that might be subject to action. This is, sadly, the world we live in. But you’re not powerless.

How to Reduce Legal Risks

To stay on the right side of the law and reduce legal risks, employers should:

• Update job postings: Make sure all job postings have a salary range, even for jobs outside of California. This way, companies can avoid breaking the rules by mistake.
• Check pay regularly: Employers should look at their pay structures often to find and fix any unfair pay differences. They should analyze employee pay data and make sure job descriptions and responsibilities are accurate.
• Create pay equity policies: Develop clear rules that promote fair pay for everyone. Make sure all employees know about these policies and that they are applied consistently.
• Train hiring managers: Teach hiring managers about pay transparency laws and how to avoid unconscious biases during the hiring process. They should not base salary offers on an applicant’s previous salary, as this can lead to ongoing pay disparities.
• Keep good records: Keep detailed notes about pay decisions, including why salaries might be different for employees doing similar work. These records can help defend against legal claims.

Benefits of Pay Transparency

Being transparent about pay has several benefits for employers and employees:

• Attracting top talent: Sharing salary ranges can make a company more appealing to job seekers and show that the company is committed to fair pay.
• Boosting employee satisfaction: Studies show that pay transparency can make employees happier and less likely to leave their jobs because they feel more valued and fairly paid.
• Encouraging diversity and inclusion: Pay transparency can help fix pay gaps that affect women and minority employees, leading to a more diverse and inclusive workplace.
• Improving company reputation: Companies that embrace pay transparency can be seen as forward-thinking employers who care about social responsibility and equal opportunity.

As California’s pay transparency laws show, the legal landscape around pay is changing quickly. Employers need to adapt to these changes to avoid legal trouble and penalties. By following pay transparency best practices, companies can stay compliant, create a fair workplace, and reap the benefits of a diverse and satisfied workforce.

We know how easy it is to get lost in all the new laws and regulations. We’re here to help! Don’t hesitate to reach out and chat with us.