Why Ignoring California’s Pay Transparency Law Could Cost You

If you think California's pay transparency law is just another piece of legal jargon you can brush off, think again. Ignoring it could cost you more than just a slap on the wrist.

We’re talking lawsuits, hefty fines, and a reputation that could take years to rebuild.

So before you toss that shiny new compliance requirement into the “too hard to tackle” pile, let’s dive into why this law deserves your full attention. Trust us, it’s a lot more than just ticking a box.

What is the meaning of pay transparency?

Pay transparency is basically about cutting through the awkwardness and secrecy around salaries. It means openly sharing information about how much employees earn or the pay range for a particular role in job descriptions.

For instance, if a company posts a salary range for a job, applicants immediately know if it aligns with their expectations. They’re also less likely to face wage gaps because everyone is aware of what their peers are earning.

What is the Pay Transparency Act 2024?

The Pay Transparency Act of 2024 refers to new regulations aimed at increasing pay transparency in the workplace. This law mandates that employers share detailed pay information, including pay ranges for job positions, with job applicants and employees.

States like California and New York are leading the charge, making it mandatory for employers to include salary ranges in job ads, promotions, and transfers.

Why does this matter? For job seekers, it’s a huge win. They can finally skip those awkward "What’s your expected salary?" questions and know upfront what a job pays. For employees, it’s a powerful tool to ensure their paycheck isn’t lagging behind their peers.

But it’s not all sunshine for employers. Companies need to stay on top of compliance or risk facing fines.

Here's an example of how Google gave utmost clarity about its salary range and factors on which it differs:

Benefits of pay transparency laws

You might assume that companies are only jumping on the pay transparency bandwagon because they’re legally required to. But, interestingly, there’s been a significant shift toward pay transparency even in places with no legal obligations.

As for the U.S., the percentage of U.S. job postings that disclosed pay ranges on Indeed jumped from 18.4% in 2020 to 42.7% in 2023. Let's see some benefits of putting this into practice:

Closing pay gaps

When everyone knows the pay scale, it’s a lot harder for biases to sneak in. Pay becomes all about the skills and experience you bring to the table, not anything else. So when compensation structures are openly communicated, organizations can: 

• Set consistent pay ranges based on skills, experience, and role requirements
• Implement standardized criteria for pay increases and promotions
• Document compensation decisions with clear rationales
• Develop trust through open dialogue about compensation practices

It’s not just fairness at play here; it’s about building a workplace that shouts, “We see you, we value you!” This helps eliminate disparate treatment, where employees are unfairly paid differently for similar work

And let’s face it, that’s the kind of vibe top talent can’t resist.

Help reduce discrimination

Beyond basic fairness, transparent pay practices serve as a powerful tool against workplace discrimination. The stakes are particularly high in states like California, where approximately 6% of all U.S. discrimination charges originate. Structured compensation management helps organizations: 

• Prevent discriminatory pay practices through systematic review processes
• Protect against retaliation claims with documented decision-making
• Build employee confidence through demonstrably fair practices
• Create accountability in compensation decisions at all levels
• Support compliance with evolving pay equity legislation

Builds trust and improve employee morale

When employees know exactly how their pay is determined and what opportunities for growth exist, they feel more secure and confident in their roles.

This boosts loyalty and reduces the temptation to jump ship.

It’s no surprise, then, that nearly 9 in 10 U.S. workers (87%) think fair compensation for current employees should be a top priority. It’s no longer just about getting paid; it’s about feeling valued and seeing that the company is playing fair.

Attracting and retaining top talent

Job hunting can feel like a wild goose chase when you have no clue what kind of paycheck you’ll get. But with pay transparency, candidates know exactly what they’re walking into. It also shows the potential hires that the company is confident in its compensation strategy.

Improves employee retention

People prefer staying in companies where they are appreciated and paid for the work they put in. In such scenarios, the thought of leaving the organization would not pop up frequently. After all, trust is where the journey begins. Employees who see a clear path for growth and feel valued are far less likely to jump ship.

Learn more: 50 ChatGPT Prompts to Help HR Professionals Work Smarter and Achieve More

California Pay Transparency Law requirements

Now that we know the benefits of California's pay transparency law, let's take a quick look at its requirements:

• Pay scale disclosure: Employers with 15 or more employees must include a pay scale for each job in any job postings
• Salary information upon request: If an employee asks for the pay scale of their current position, you must provide it, no questions asked!
• Record-keeping: Employers are required to keep records of job titles and salary history for a certain period (usually 3 years) to keep on top of pay practices
• Employee protections: The law also protects employees from retaliation if they discuss or inquire about wages with coworkers

With these requirements, companies can finally get their compensation management on point, without crossing any legal bounds.

The Impact of Pay Transparency Law on Employers

Pay transparency laws are like putting your salary in the spotlight—ready or not, here it comes!

Here's how these pay equity laws affect employers:

Increased competition for talent

Employers may need to adjust their salary offerings to stay competitive in the market. If your salary offers were a little “meh” before, you’re going to need to give them a facelift. Attracting top-tier talent might get more expensive, but hey, it’s all about playing the long game, right?

Higher expectations from employees

With everyone’s pay out there in the open, employees are suddenly going full-on Sherlock Holmes. “What are they making?” “Wait, how much am I making?” Expect more side-eyeing of pay slips and casual lunchroom comparisons.

Potential legal and reputation risks

Pay transparency laws aim to close wage gaps, but if an employer’s pay structure reveals significant disparities based on gender, race, or other protected characteristics, it could lead to reputational and legal challenges.

Companies may face public scrutiny or even lawsuits if they are found to be non-compliant or if their pay disparities are not justified.

Enhanced employee trust and engagement

But it’s not all bad news. For those who have been feeling the love from their paychecks, this transparency thing could be a win. Employees might feel all warm and fuzzy knowing they’re being paid fairly, which means they’ll stick around longer.

More trust, less drama. Win-win!

Penalties for Non-compliance with Pay Equity Laws

California Civil rights department is quite active with its approach for employers who fail to comply with pay transparency laws. The penalties range from a $100 penalty per employee for failing to file a pay data report to $200 penalty per employee for repeat violations.

And for those who fail to post the pay range in job listings, a penalty of up to $10,000 is levied per violation. No doubt it's considered one of the most aggressive pay reporting law in the U.S.

It's not just about the money. Failing to comply can damage your company’s reputation. Word spreads fast, and the public perception of your organization as an employer could take a hit. Trust us, no one wants to be known for dodging pay fairness.

And worst case scenario?

Employees might file claims for back pay if they believe they were underpaid because of discriminatory pay practices. Courts can order employers to pay the difference, and in some cases, this could be retroactive—meaning you're paying for mistakes made years ago.

How much pay transparency do employees want?

When it comes to pay transparency, employees want more than just a peek behind the curtain—they want the whole show!

A study suggests that most employees are eager to know how their compensation is decided and would love to see salary ranges for all roles within their company.

However, there's a catch: not everyone feels the same way.

Different generations have different views. Younger workers, especially Millennials, are all about full transparency. They want to know exactly how much everyone’s earning.

Older generations? They’re a little more reserved when it comes to knowing everyone’s pay.

And there’s another layer to this. Employees who think there are gender or racial pay gaps in their company? They’re pushing for even more transparency. They want to ensure the pay process is fair for everyone.

So, what’s the bottom line? Employees are ready for more pay transparency. They want to see the salary ranges, understand how pay is determined, and feel confident that everyone’s being treated fairly.

Employers, it might be time to open up and share a bit more! 💸

Learn More: Cost-Effective Recruitment Strategies: The Ultimate Guide to Maximizing Your Hiring Budget

How Cambrian Homecare Got Slapped with a $100k wake-up call

When it comes to California’s pay data laws, Cambrian Homecare learned the hard way—ignoring paperwork can cost a fortune.

The California Civil Rights Department (CRD) dropped the hammer on the company for skipping its pay data reporting for three years straight (2020–2022). The result? A $94,778 settlement, with $70K in penalties and the rest for legal costs. Ouch! 😶

California’s pay data rules, born from Senate Bill 973, aim to tackle wage gaps by requiring employers with 100+ workers to report pay and demographic data annually. Cambrian missed the memo—despite multiple warnings.

Now, the Long Beach-based company, with 2,000+ employees, is back on track, promising to submit future reports on time. CRD hopes this sends a message to employers: check your pay gaps and file that report—because equal pay isn’t just the law, it’s the right thing to do.

Stay Compliant with Pay Equity Laws using Darwinbox

Pay transparency is no longer just a trend- it's becoming a legal requirement and a key factor in building employee trust. Organizations require robust systems to ensure fair compensation practices and compliance with evolving pay legislation.

Darwinbox's compensation management solution helps organizations implement transparent pay practices through:

• Automated pay equity analysis across roles, departments, and demographics
• Integration of market benchmarking data to validate compensation decisions
• Built-in compliance monitoring for local and global pay transparency regulations
• Clear communication tools for sharing compensation frameworks and policies

Take control of your pay equity initiatives with a platform that combines powerful analytics with intuitive management tools. 

Want to know more about how it can help? Talk to our team today!

FAQs

Is there a limit to how big a pay range could be, and still be legal?

There’s no strict upper limit, but pay ranges need to be justified by factors like experience and skills. The key is avoiding large pay gaps that seem unfair or discriminatory based on gender or race.

Is pay transparency a law in California?

Yes, California requires companies to share pay scales upon request and includes more detailed reporting on pay disparities based on gender and race. Moreover, job postings must list pay ranges for companies with 15+ employees.

Can two employees doing the same job be paid differently?

Yes, but only if there are valid reasons like different experience or skills. Pay differences based on discrimination are illegal and could lead to serious legal issues.

Does pay transparency prevent discrimination?

While pay transparency helps to uncover and reduce pay gaps, it’s not a foolproof solution to discrimination. It can, however, encourage companies to address inequalities, as employees become more aware of discrepancies and can raise concerns more easily.

How do employers determine pay ranges?

Employers usually determine pay ranges based on factors like industry standards, job responsibilities, geographical location, and the skillset or experience of the employee. They may also use market data or salary surveys to ensure competitive and fair pay.