What is the Pay Transparency Law in California? Everything You Need To Know

A recent study by Payscale revealed that 82% of employees are likely to trust an employer sharing clear and transparent pay information. California has led the charge on equitable compensation practices, and the heightened stakes in 2024 with upcoming pay transparency laws impact employers as never before.
 

As a chief human resources officer, along with experience in compensation, an understanding of these laws goes beyond just compliance-it is a strategic imperative. From mandatory salary range disclosures to reformed Equal Pay Act provisions, these laws will compel most organizations in compensation and hiring practices to undertake a new path.
 

This guide polishes every detail to help you comply with legality while considering competitiveness and alignment with developing changes in California's legal landscape.

What is Pay Transparency?

A policy of openly communicating details of an organization's compensation practices, salary structure, and pay equity initiatives with the aim of increasing accountability and pay equity.

California pay transparency laws are embedded in a larger agenda of equity, worker empowerment, and strong action against discrimination in pay practices.

Who is Impacted by California’s Pay Transparency Laws?
 

The reach of these laws is extensive, affecting myriad stakeholders:

1. Employers

All companies with employees in California (whether incorporated there or out of state) are governed by the laws.

Employers residing in California with 15 or more workers must provide pay scales in every job posting.

2. Job Applicants

This will allow candidates to make well-formed decisions regarding applications for roles with a disclosed pay range.
 

Any level of trust provides a platform for employment equality-mindedly women and minorities who are disproportionately affected by pay gaps.

3. Current Employees

Existing staff can request salary ranges for the job they are in, creating greater internal clarity and discussion about pay equity.

Why Pay Transparency Matters

For HR and compensation professionals like you, pay transparency is not just about complying with the law. It carries far-reaching implications for managing talent and shaping the culture of an organization:
 

• Closing Pay Gaps: Transparent pay practices shed light on pay disparities and give a nudge to corrective measures.
• Improving Talent Acquisition: Candidates prefer employers willing to integrate fairness and accountability.
• Boosting Retention: By creating an environment of trust and loyalty, transparent compensation sources reduce turnover.
• Advancing DEI Efforts: Transparency in pay is indeed an undergirding principle in diversity, equity, and inclusion strategies.

What Employers Should Do Now

California's impending laws create hurdles and opportunities for employers in 2024. Here’s some strategies that HR leaders can use to upgrade their systems:
 

Understanding the Law on Pay Transparency in California

The new regulations will ramp up mandatory disclosures and proactive measures. 
 

Employers are obliged to:

• Explicitly declare salary ranges in job postings- Upon request, notify current employees of their pay scales.
• Submit pay-data reports to California's Civil Rights Department (CRD)-Failure to secure compliance can be matched by penalties, lawsuits, and reputational damage.
• Ensure salary ranges seem realistic and reflect genuine expectations for the given role.
• Avoid wide or vague ranges to prevent scrutiny from regulators and skepticism from candidates.
   

Pro Tip: Regularly benchmark salaries against market data to ensure ranges are competitive and aligned with industry standards.

Benefits of Pay Transparency

With the adoption of pay transparency, quantifiable benefits could include:

• Stronger Trust Among Employees: To a keen mind, such practices indicate integrity and fairness.
• Smaller Gender Wage Gaps: Women and marginalized groups may be included where equal pay opportunities offer themselves.

• Stronger Employer Brand: Transparency in salary attracts workers with higher potential to organizations. 

   

California Equal Pay Act: Key Provisions and Changes

Presently, the California Equal Pay Act complements pay transparency laws by outlawing pay discrimination across demographic lines. 

What Were the Most Significant Changes to the Equal Pay Act?

• The statute broadened its definition from "equal work" to "substantially similar work," thus enabling far more jobs to be compared.
• Employers need to prove the existence of pay differentials based on defined, legitimate business reasons.

When Were These Changes Effective?

The most substantial amendments went live on January 1, 2016.

Have There Been More Changes Since 2016?

Yes, other modifications have defined terms, clarified reporting requirements, and amplified penalties associated with noncompliance.
 

Key Requirements Under the Contemporary Equal Pay Act
 

• Substantially Similar Work- While determining wage equality, the analysis focuses on such aspects as the skill, effort, and responsibility which some jobs may rightfully hold in similar conditions rather than the merits of just the job titles.
   
• Recordkeeping Requirements- The collection of records about wages, job types, and information pertinent to them from employers must be left on record for three years.
   
• Burden of Proof- That employees are to show the discrepancies in wages; that employers must provide just cause for them.

Three Ways to Prepare Your Policies and Practices for Compliance

1. Prepare an Inventory of Employee Data
Make sure that payroll, job descriptions, and classification records are accurate and accessible.
 

2. Review Hiring Practices

Adopt a systematic form of hiring procedures to prevent unconscious bias and ensure uniformity in the offers for compensation.
 

3. Specify and Disclose Salary Ranges

Keep updating salary ranges and train managers on how to communicate them effectively with candidates and for performance evaluations.

Basic Requirements of California’s Pay Transparency Laws

• Pay Transparency

  Salary ranges must be included in all job postings for employers with 15 or more employees. Job postings must include the hourly wages or salary compensation; a general  description of any other compensation or benefits; and the date when applications for the job will no longer be accepted.

• Pay Data Reporting

  Under the law, "wage range" is the minimum and maximum hourly rate in job postings and advertisements. Employers must annually report pay data to the CRD, delineating disparities across gender, race, and other demographics. 

• Prohibition Regarding Salary History Inquiries

  Employers shall alight upon any applicant's salary history when making a determination regarding salary decisions. That is, an employer may ask an applicant for his or her salary expectations for the position, as distinguished from asking what the applicant earned in the past, making the culture more open and understanding.

Frequently Asked Questions About the Equal Pay Act

What Does “Substantially Similar Work” Mean?

It refers to work requiring comparable levels of skill, effort, and responsibility, even if job titles differ.

Can I File a Claim if the Higher-Paid Employee Has a Different Job Title?

Yes, the law focuses on the nature of the work rather than job titles.

How May an Employer Defeat an Equal Pay Act Claim?

Employers must show pay disparities are based on:

1. A seniority system.
2. A merit system.

3. A legitimate business necessity, such as education or experience.

    

What are the pay transparency requirements in California?

California's salary range disclosure law requires employers with 15 or more employees to disclose the salary range for every active job posting. This requirement came into effect on January 1, 2023, with the aim of informing job seekers about pay transparency.

What is the Transparency Act in California?

California's AI Transparency Act was introduced on September 19, 2024, requiring CSR firms selling generative AI systems to implement tools that can detect popularity in those AIs by recruiting users and providing them with forms to declare whether content is AI-generated or not.

What is the law for salary employees in California?

According to California's law, salaried employees must earn at least double the amount a minimum wage worker would receive for a 40-hour work week. This is to ensure that the amount which salaried exempt workers earn is viewed as a fair compensation in accordance with state rules regarding minimum wage.

Does California's pay transparency law extend to contractors?

California's pay transparency law does include or see to employers with 100 or more employees, including when these personnel have been introduced via labor contractors. Yearly, employers in this category must file pay, demographic and workforce data on a non-state owner-based scale to the California Civil Rights Department, which however does require at least one hired employee who is sitting within the borders of the state. 

How Can CompUp Help Foster Pay Transparency?

Pay transparency laws are becoming increasingly important as organizations strive to create more equitable workplaces. These laws require employers to disclose compensation information and ensure that pay practices are fair and transparent. 

These laws require employers to disclose how much employees get paid, hence making salary formulation equitable and transparent. 

CompUp is designed to make the challenges of making-pay-transparency easier while building a fair workplace. 

Here is how it can help your organization:

• Comprehensive pay gap analysis: CompUp has a powerful dashboard to analyze pay gaps across demographics and provide actionable insights to close the differences and promote pay equity.

• Streamlined salary structure management: Organizations can create, manage, and update salary ranges on their most efficient platform.

• Increased pay visibility: Provides clear communication about pay structures, so all employees clearly understand how their pay is decided and how it links to the organization's goals.
   

• Peer comparison features: CompUp provides transparency so that an employee can compare their pay directly with others, leading to fairness and a culture of openness.

   
   

• Data-driven insights for decision making: CompUp optimizes pay decision-making based on real-time and market data and guided analytics that establish the criteria of the pay structure by maintaining a healthy competitive balance, equity, and alignment with business objectives.
   

By using CompUp, companies can effectively make transparency a reality and build an increased trust from employees while creating a reputation for being an employer who treats one and all fairly. 

Conclusion
 

The California Pay Transparency Law is changing how organizations manage their compensation. Compliance is only the beginning for HR leaders and compensation professionals; to instill trust and equity, and to position one as a pay equity leader in this market, comes after one complies.

Starting now - refining policies, updating salary data, embracing transparency—compliance isn't just about meeting requirements; it is about creating a workplace that empowers success based on fairness and trust.

If you are looking for a solution that makes compliance easier and uplifts your compensation strategy, CompUp can be your go-to. The full-stack compensation management software was designed to help you achieve fair pay, reduce discrepancies, and future-proof your organization. Get started today.