California Pay Transparency Laws Explained

California’s Pay Transparency Laws came into effect on January 1, 2023. Shortly after the law’s effective date, the Labor Commissioner released some information to clarify frequently asked questions about how it works. These answers have been published alongside other questions about the California Equal Pay Act. So we’ve summarized them here for your information: 

California Labor Commission FAQs About Pay Transparency Laws

Defining ‘Pay Scale’

Pay Scale is defined by the Act to mean “the salary or hourly wage range the employer reasonably expects to pay for a position. An employer who intends to pay a set hourly amount or set piece rate amount, and not pay a range, may provide that set hourly rate or set piece rate.”

The Labor Commission clarified that the pay scale does not need to include bonuses, tips, or other benefits to be legally compliant (though an employer may wish to include this information to make the offer more compelling for potential hires). However, this must be included if the employer pays a commission or piece rate. 

The Labor Commission also clarified the posting itself must include the pay scale information. It is not sufficient to provide a link to the salary range in an electronic posting or a QR code in a paper posting. 

Information About The 15-Employee Limit

The pay transparency law requires an employer with 15 or more employees to publish its pay scale for a position in any job posting. Unfortunately, the law does not outline a method to ‘count’ the employees for that 15-employee limit. The Labor Commissioner provided some information about how to undertake this task by pointing to earlier guidance it provided. 

The Labor Commissioner states: 

Any individual performing any kind of compensable work for the employer who is not a bona fide independent contractor would be considered and counted as an employee, including salaried executives, part-time workers, minors, and new hires. 

It goes on to outline that a court of the Labor Commissioner would focus on the facts at the relevant time to determine how many employees an employer had. This will be relevant for employers with seasonal or intermittent workers, and those who are hiring for multiple positions at the time it reaches the 15-employee limit.

It’s also important to note that it counts all employees, regardless of geographical location. So it is not limited to employees in California – or even the US. 

Ultimately, it’s likely that a court will determine disputes about any (reasonable) counting method employed to count employees. Employers should bear in mind that courts will typically favor the ‘reasonable interpretation’ that is most favorable to workers if multiple options exist.

A Note For Out-Of-State and National Employers

The Labor Commissioner has outlined that the job posting must include the pay scale within the job posting if the position may ever be filled in California – either in-person or remotely. 

Best Practices to Pull From The Labor Commissioner’s FAQs

Here are some quick best practices based on these FAQs:

• You must correctly classify your workforce. Misclassifying employees as independent contractors already comes with the potential for significant consequences. Employers will need to add non-compliance with the pay scale laws as an additional impact of misclassifying employees (if those incorrectly classified independent contractors bring the total employee count to 15 or more). 
• If you’re unsure of how many employees you have, consider posting the pay scale anyway. 
• You should include the pay scale in writing in the job post. Employers shouldn’t look for ways to ‘get around’ this requirement. The Labor Commissioner has already dismissed other ‘solutions’ to include pay scale information, like links or QR codes. 

If you’re uncertain if your job postings are compliant, reach out. Our employment attorneys would love to help.

• Employment Law