Episode 169: Untangling Confusion, Misconceptions on California’s Pay Scale Disclosure Requirements

Welcome to the Workplace, a podcast by Cal Chamber. I'm Matthew Roberts, the Labor Law Helpline Manager and Employment Law Council with the California Chamber of Commerce. Hello everyone here at the Chamber. We have ended our 2023 employment law updates and it's always interesting to see which new laws that we discuss seem to have the most impact on employers. And with this year's version, there was one clear choice for the most impactful and that was Senate Bill 1160. Our regular listeners will recognize that law as we have discussed it at various points over the last year as it worked its way through the legislative process. As a brief refresher though, SB 1162 had two distinct components to it, a new set of pay scale disclosure requirements and then also amendments to California's existing pay data reporting laws. For this episode, we will be focusing only on the pay scale component as that aspect impacts all employers with any number of employees in California, as well as also the amount of confusion that we saw about this law. If you are looking for updated information on the pay data reporting amendments, though, we will be sure to link some information to updated resources in the write up associated with this podcast. Now for this episode, I couldn't think of a better person to join me for a discussion about this law than Ashley Hoffman, Cal Chambers employment law advocate who worked hard on behalf of all the business community as this bill went through its journey towards becoming law. So welcome back to the show, Ashley.

Thanks, Matt. Happy to be here.

So I think it would help employers, I think from a practical standpoint to kind of describe what the state was trying to address here with the pay scale requirements. Before we really get into the nitty gritty, why were they interested in making it public what employers are now paying for these jobs?

Great question. So there has been a lot of discussion, I think, both on the state level and federally about wage gaps specifically and most prominently, I think between genders, right. That women often make less than men for the same job. That has been a historical problem for a long time. A number of years ago, California decided that the information that the federal government was collecting was not really sufficient. So it enacted its own law requiring pay data reports. And this was kind of seen as a continuation of that. I will say, you know, California hates not being first, especially when it comes to labor and employment law. And so I also think the fact that other states, like New York, Washington had implemented laws like this really was in Colorado, really was driving, you know, California, because of course we can never be left out of the group.

Of course, of course. So you know, when we talk about this, you know, pay scale publications or kind of just bringing to light what employers are paying for jobs, I think that obviously presents a couple of distinct problems for employers. I mean, first there's the technical compliance with this law, which we will touch on. But then there's also just this overriding practical compensation considerations that we'll break down separately. So let's start with this technical requirement and break this law down into its compliance components first. There are pieces of this law that apply to all employers. So what parts of this bill apply to everybody?

So it's important to remember that some of this law has already been in existence for a couple of years, and that is specifically not being allowed to ask, right. About salary history unless someone voluntarily discloses that. Not being able to rely on that when you're setting someone's salary. So what we're adding to that is that a current California employee may ask for the pay scale for the position that they are in.

And then also an applicant for a position that will be filled by a California employee, or at least where the work can be performed in California, can ask for the pay scale for the position where they are applying. You know, for a number of years prior, you could only ask, really, after a first interview. And so that that piece has changed. And we're adding in current employees, which I think was probably honestly an oversight when they did the salary law a couple years ago that allowed applicants to ask.

Now, as far as internal candidates, and this is something that we've heard from multiple attendees to our updates, is sometimes they'll just post positions internally. Right. And they want to give existing employees first crack at a promotional opportunity or change of profession within the organization. So do you have to provide that pay scale to applicants that are internal candidates?

Great question that. I know you all have received a lot, so you actually do not have to provide the pay scale to internal candidates that is specified in the definitions in the. In the law.

Okay, great. So you and I have been using the phrase pay scale quite a bit, and we're talking about providing these things to employees and applicants for positions. What is a pay scale, Ashley?

Pay scale is defined in the statute as the reasonable hourly or salary range that the employer, quote, expects to pay for the position.

So we'll talk in a second about providing the pay scale on job postings for other certain employers. But we did get some guidance from the DLSC on what this means. For example, commissions and piece rate do need to be included if it forms, you know, the hourly or salary Range. So for example, some companies, you know, may pay a certain range and that's kind of anticipated based on certain commissions, right, that are expected. So if it's really, I think, forming the core of what you're receiving, like the core rate, then you have to include that. But something like a bonus, tips, you know, fringe benefits, things like that don't have to be included. The department does remind people that they may want to, to be competitive. I know a lot of smaller companies, right, that are at a potential disadvantage because of this law because they cannot put up the bigger, flashier numbers that a big company can. They may want to include, you know, something like bonuses that people could receive or other kind of benefits like stock options or what have you. Also, if it's just a set rate, it is okay to just put the set rate, right? You have certain professions where maybe you hire everyone at a certain rate. And that is because it is largely like a tip based profession. You can just put the set rate. You don't have to kind of make up a range, right, of what someone may receive in tips. So it is permissible if you really just have one set rate for everyone to just put what that rate is.

Okay, good. And you kind of alluded to this next question, but now that we've got the request.

How do we provide the pay scale and what is our time frame? You know, how do we comply once we get that request?

You know, as far as time frame goes, it's not specified in the law. So best practice is to provide it as soon as you can. We also recommend that you provide it in a form that can easily demonstrate compliance if that were ever to be challenged. So, for example, in a written format, if you want to have a different protocol for responding, obviously you're permitted to do that, but we recommend you probably run that by counsel again if there was ever a challenge, right, as to whether or not you actually provided this information, you want to make sure you're keeping a record of that.

Okay, so we've talked about current employees asking for the scales for their own positions and we've talked about applicants asking for scales for the positions for which they're applying. But what about actually putting it on the recruitment copy itself? The job posting you see on LinkedIn or indeed, or the classified ads? I'm going to date myself there, you know, when jobs used to be in the classified ads. If you have a job posting, where's the requirements around that?

So for employers that have 15 or more employees, you have to put the pay scale on all of your job postings, this is true whether you post it or whether a third party posts it. So if you do use some of these other websites like a LinkedIn or something, you can't just kind of throw up your hands and say, well, LinkedIn didn't put it on there. You know, that's, that's out of my control. Right. You have to make sure that the third party is being provided the information and that the third party is accurately posting it because you don't want to end up getting sued or, you know, having something hold you liable just because the entity you're using didn't post it.

Okay, Ashley, here's the million dollar question. Quite literally, what is a reasonable scale or what is a scale for which you would reasonably expect to pay for this position? Because as you said, we're not the first state to do this, so we do have some examples out there. But also this law went into effect January 1, so even some organizations and businesses here have started to do it. And you start to see some news making ranges where some positions are seeing ranges from like 90,000 to 900,000 for the same position. So what practical things should employers consider when they're trying to create the actual scales for their positions?

So I know this is a question that you all get a lot, and I think this has a lot to do with, you know, are you taking into account what you pay a new person all the way up to someone who's been there for 40 years? And that's a difficult question. That's not really, I think, addressed by the guidance. The way I think of it though is, you know, when you are thinking of hiring for this position, truly what is the range like if you, you know, if some people who've been there for 40 years are making X and you would never, ever, ever pay that to someone that you're hiring new, then I don't really think your range probably needs to go all the way up that high because that's not, that's really not what you're reasonably expecting to pay, you know, but if it's some situation where, say you're hiring for a position where it's really more dependent on how much experience that person has and maybe you would go up, you know, 100,000 to $100,000. And in my opinion, that truly is the range that you would be willing to pay. So I think that is a fair range to put on there. So I know, for example, in New York I read some articles that people thought the ranges were too broad, but Again, especially when you have really highly technical positions. I don't think that's the company trying to be misleading in any way. You know, a new attorney, like even take attorneys, right. A first year associate and a partner that's bringing in new clients are obviously going to be making very different amount of money. And if you're hiring for a position and it could, you could end up hiring really either of those, you may truly have a very large range that you're posting.

Good. And I think, you know, that concept and kind of evaluating your compensation practices moves us away from this technical compliance that we talked about. Right. You know, you have to create this pay scale. You have to post if you have 15 or more employees provided upon request. But what about things that we're starting to see in here about situations where employers are now posting these ranges that are higher than what they pay current employees or, you know, they put their current employees at the very, very bottom of the scale because what their preference would be is to pay more because it's been more difficult to recruit people. How should employers handle this issue?

That's a really good question and something that got talked about a lot after this law passed. And as we know, employers, especially during the pandemic and coming out of the pandemic, have had a really hard time recruiting. And so I think, you know, this all kind of gets wrapped up to this idea of equal pay. And honestly that I think this bill, this new law is going to push employers, and it should, to really evaluate their staff as a whole, you know, and make considerations. Right. Of does this mean then you are going to raise compensation for the rest of your staff? If you don't, are you at risk for, you know, an equal pay claim? Right.

It's really, I think, making employers also look internally and see, you know, hey, if I'm going to hire someone with X amount of experience at this rate, I want to make sure morale is not then, you know, low. Especially if employees can now ask what they're making, what the range is, if they can see on a job posting for their position what I might be willing to pay. I think it's going to force a lot of employers to have to raise the wages of other workers to make sure again, that you're not risking, you know, any sort of claim or litigation over that. But then also to make sure that morale, you know, is staying high and that your current workers aren't feeling undervalued.

Excellent. And lastly, we wouldn't be talking about an employment law, Ashley, if we weren't talking about documentation. So are there any updated record keeping components to this law?

Yes. So employers must make sure that they keep track of employee job titles and wage rate throughout employment plus through three years after their employment ends. As a reminder, under Labor Code 226, you are required to keep certain records about wages paid anyways. So hopefully this actually isn't too much of a change for you in your record keeping. I will say the original bill had a piece in there that we were successfully able to amend out that would have required job descriptions just because a lot of employers don't actually have job descriptions. As we all know, what says in your job description can easily change, especially if you have, you know, a colleague out on leave or something, you know, some some other job duty.

All right, excellent. Well, Ashley, thank you so much for taking the time to be with me today. I do really think this discussion was helpful to kind of untangle the law and some of the misconceptions and confusions about it.

Thanks, Matt. Thanks for having me.

And thank you listeners, for joining this discussion on the workplace. Please comment, share and subscribe to Cal Chamber's podcast by visiting calchamber.com.

Sam.