February 02, 2023 | HRD | 2 minute read

Bracewell’s Bob Nichols recently discussed with HRD about pay transparency and a new law coming into effect that will require California employers with 100 or more employees to report the median and mean hourly rate within each job category, for each combination of race, ethnicity and sex.

“This is a big deal,” said Nichols. “It’s intended to achieve better pay equity. The notion is that historically, women and certain racial and ethnic groups have been underpaid. Those disparities perpetuate themselves, so the disclosure will help to alleviate those disparities over time.”

The new law expands upon the framework of the California Equal Pay Act, which requires employers in the state to disclose the pay range for a job if an applicant asks for it after an initial interview, as well as Senate Bill 973, in which private employers with 100 or more employees are required to submit a pay data report to the California Department of Fair Employment and Housing that includes the number of employees by race, ethnicity and sex.

“Some people also think this may drive up wages,” Nichols added, “based on the notion that if companies have to disclose what they might pay, they won’t want to look like their pay range is low, especially in a competitive job market.”

California’s new legislation also applies to companies located outside of the state hiring California residents for remote positions.

“National companies that operate everywhere will have to throw in the towel and have some kind of ‘across the board’ pay transparency system that abides by these various laws,” explained Nichols. “It won’t be easy because they’re not consistent. Something really frustrating about the current growth of state-specific employment laws is there’s no real effort among these states to be uniform in their approaches. That makes compliance a nightmare for employers.”

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