In-House Advisor

Are You Prepared To Be More Transparent About Your Salaries?

November 1, 2022


Many states are now enacting laws to further promote pay transparency, and if you have employees in those jurisdictions, you need to take note. Not surprisingly, California’s Pay Transparency Act is a leading example of this and has a number of important and new requirements.

First, California employers with 15 or more employees will be required to include pay scales in new job postings. This obligation extends to  employers engaging in a third party for recruiting (e.g., job posting boards). Employers, therefore, should ensure that contracts with third parties include this requirement and appropriate indemnification clauses.

Second, California now – like Massachusetts (see M.G.L. c. 149 § 105A(c)(2)) – prohibits employers from asking about an applicant’s salary history or using salary history as a factor in a hiring decision. However, if an applicant voluntarily discloses salary information, employers may consider that information in determining the salary for that applicant. Further, employers may ask about an applicant’s salary expectations – which is a great way to engage in a conversation that might yield information helpful to hiring without risking a statutory violation.

Third, California now requires employers to disclose a position’s pay scale to an applicant or a current employee upon request. Further, employers must maintain records of job titles and wage histories for each employee for the duration of an employee’s employment, plus an additional three years. There is a rebuttable presumption in an employee’s favor if employers fail to keep those records in any future dispute.

Fourth, while California is following other states that already have enacted similar laws, it is the first state to allow an individual to directly ask a court to order employers to comply with the new pay transparency law and award “any other relief” if a violation occurs. Thus, those with employees in California need to pay particular concern to the new rules.

California does not currently provide guidance about how the new law applies to multi-state employers. However, other jurisdictions that have similar pay transparency laws, such as Colorado (see  CO Rev. Stat. § 8-5-201), mandate that their pay transparency laws apply to any employer with (1) at least one employee in Colorado, and (2) disclose pay information in job postings for positions that are expected to be, or can be, performed in Colorado (see Colorado Equal Pay Transparency Rules, 7 CCR 1103-13). This means remote positions are in play.

More states surely will follow, and similar legislation has been proposed in Massachusetts (see H 1950 and SB 1208).

With this new pay transparency trend, in-house counsel should review their HR and recruiting policies and practices. Each state law is different, so it will be important to contact an employment lawyer to evaluate which state laws may apply to you and understand the specific requirements of those states.

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