A new law that goes into effect next year could shake up salary structures at companies across California, empowering workers and calling out businesses that unfairly pay lower salaries to women or workers of color.
Starting Jan. 1, Senate Bill 1162 requires employers to list salary ranges for all job postings, and to provide that information to existing workers upon request — allowing employees to get a better sense of what their peers are earning, and how their own wages compare.
Similar laws are growing in popularity across the country, and have passed in places, including New York City, Colorado and Connecticut. Here’s what the new law means to California employers and employees:
What’s different under this new law?
The biggest change you’re likely to see is that starting Jan. 1, every job posting you see on Indeed, LinkedIn or anywhere else should include a salary range for the position — that is, if the company hiring has at least 15 employees. Furthermore, if you ask your boss for a salary range for your current role, they are required to comply.
Employers with 100 or more employees already have to compile reports on what they pay, which are submitted to the state once a year. Under the new law, those reports will become more detailed. Now, employers will have to include median and mean hourly rates broken down by race, ethnicity and sex.
The goal is to force employers to be more transparent about what they pay, ideally helping to close gender and race-based pay gaps. As of 2020, women who worked full-time in California made less than 88 cents for every dollar made by their male counterparts, according to the U.S. Bureau of Labor Statistics. The discrepancy is even worse for women of color. Latinas in California make just 42 cents for every dollar earned by White men, according to Hispanas Organized for Political Equality.
Will it work?
The new law only requires employers to be transparent about what they pay. If they discover any disparities — say they are paying women less for doing the same job as their male co-workers, for example — this legislation doesn’t explicitly require them to fix that. But experts say it will pressure employers to change.
For one thing, an employee could find out they’re being underpaid when their company lists a job posting for a similar job with a higher pay range.
There could be a reason for a pay gap, such as different levels of experience, pointed out Susie Solano, a Sacramento-based lawyer who represents employers.
But if there isn’t, the employee could sue their boss — and win, said Mariko Yoshihara, policy director and legislative council for the California Employment Lawyers Association.
“This is really forcing employers to look at pay disparities and be able to justify why there are those disparities,” she said.
How can employees take advantage of this new law?
If you see a discrepancy between what you’re being paid and what other employees doing similar jobs are making, contact your human resources department, said Kim Tavaglione, executive director of the San Francisco Labor Council. If your employer can’t justify the difference, you could file an administrative complaint with the state’s Civil Rights Department or Labor Commissioner’s Office, Yoshihara said. Or you could reach out to a labor lawyer.
Tavaglione expects people will discover plenty of pay disparities that should be rectified.
“I think employees are going to be quite surprised once the information is all reported out,” she said.
If you see a job posting that doesn’t list a salary range, or you think an employer isn’t complying with the new law in another way, tell them so, Yoshihara said. It likely will take some time before all employers understand their new obligations. If they still don’t comply, you can get a lawyer and take them to court, or file a claim with the Labor Commissioner’s Office.
Employers that flout the job posting requirements are subject to hefty fines — up to $10,000 per violation. Those that don’t submit the proper wage reports to the state could be on the hook for fines of up to $100 per employee for a first violation, and up to $200 per employee for subsequent failures.
What should employers know?
Employers should start looking into their obligations under the new law right away, Solano said. Wage reports are due to the state May 10, though the rest of the law’s requirements go into effect Jan. 1. Solano suggests compiling a report ahead of time and running it by an attorney. And if they discover any pay disparities, the employer should consult with their legal counsel and consider adjusting the salaries.
“Most definitely it should be on their radar,” Solano said, adding it wouldn’t surprise her if the Labor Commissioner starts doling out fines to send a message that this new law is important.
What about contract workers?
The law also offers new protections to contractors hired by outside staffing agencies, such as temp workers. But it doesn’t cover independent contractors who receive a 1099 form when tax season rolls around, instead of a W-2.
A study from Silicon Valley-based Tech Equity Collaborative found tech companies are hiring contractors for extended periods of time to perform essentially the same jobs as regular employees. But contractors, who are more likely to be women and people of color, are getting paid less. The new bill would require employers to include salary ranges for these contractors as well.
What about remote workers?
Employers that have an office in California but have employees working remotely in other states — as well as employers based in other states who have employees working remotely in California — should consult an employment attorney to find out whether and how the law applies to them, Solano said. That also means employers must know where all of their employees are working — something that isn’t always a given anymore.
“That’s a fairly new issue because of remote work and the increase in remote work that we have seen with COVID,” Solano said.
Will this make it harder for employers to recruit new workers?
On the contrary, Yoshihara thinks it will help. In an October poll taken by Monster, employees overwhelmingly said job postings should list a salary range, and more than half said they wouldn’t apply for a job that didn’t.
“Employers just need to embrace that this is best practice,” Yoshihara said.