Pitfalls to Avoid in Complying with Pay Transparency Laws
“It would be relatively easy for companies to underestimate their responsibility or to fall short of providing what is being asked of them.”
– Erin Medina, Chief Legal Officer at Eastridge
Pay Transparency Laws have been around for some time with the purpose and intent of narrowing the pay gap between individuals of different genders, races, or ethnicities by making salary and wage information more available and transparent. The goal of these laws is to ensure equal pay for equal work.
Pay Transparency Laws Will Expand in 2023
Compliance with these laws in recent years has become more challenging. This is because some states found that the federal government’s and/or the state’s original transparency laws didn’t go far enough to close the pay gap, so states are adding requirements such as mandating that all job postings contain a salary range for the position and adding salary range reporting requirements, and more states will follow suit with their own laws in 2023.
- Overall, approximately 17 different states have or will legislate around pay transparency
- In 2023, a total of 8 states, cities, counties and municipalities, including California, will follow the lead of Colorado to mandate that any job posting must include a salary range and/or other information (such as benefits) and five other jurisdictions will require employers to provide salary ranges when requested by the applicant (e.g. during interview or anytime prior to offer)
- California’s 2023 updated Pay Transparency Law will require employers of 100 or more full-time employees or temporary employees hired through a labor contractor/staffing agency to provide pay data broken down by job category, race, ethnicity and gender on both their internal employees and the temporary workers to the State of California by no later than May 10, 2023
California employers will have the heaviest lift of the 17 states. In reviewing the state’s requirements, it would be relatively easy for companies to underestimate their responsibility or fall short of providing what the state is asking for. Employers should review their responsibility now to avoid some of the likely pitfall scenarios outlined below.
Pitfall #1: Not Knowing Your Headcount
All it takes to be subject to this state law is for a company of 100 or more to have one temporary or direct internal employee based in California to have to report on that headcount. So to ensure compliance, a good place to start would be to create a list of all employees, both contingent and internal, and find out where they are all based.
Pitfall #2: Inaccurate or Missing Agency Data
Companies that engage labor contractors/staffing agencies for temporary workers are the ones tasked with reporting the pay data to the State of California, not the labor contractor/staffing agency. However, the labor contractor/temporary staffing agency does need to provide the data to the company that engages them for temporary workers.
The information on an individual's race, gender, ethnicity, age, etc., is provided to employers on a voluntary basis, and the form most companies use to gather this data includes an option not to self-identify. However, even if there's no data on an individual or a group of individuals in your contingent workforce, there's still a requirement to report on it. This is why it is critical to partner with your staffing agency/labor contractor early to ensure complete and accurate collection of this data.
Pitfall #3: Underestimating the Time it Will Take
Collecting, analyzing, working to fill in data gaps, and finally, reporting employee data, is going to require a substantial amount of work. Some companies will struggle to make the May 10, 2023 due date for the first report.
Companies that use several agencies or have extended contingent workforces, or both, may need help in complying. Working with your staffing partner sooner rather than later can help. For example, Eastridge will gather the personnel data through the voluntary EEO form along with pay rate data for temporary workers assigned to clients in the template format required by the State of California. In the event that an individual chooses not to self identify, Eastridge will take reasonable steps to provide the data in the format required by the State of California.
Pitfall #4: Mishandling Protected, Confidential Information
The information employers must report on is highly sensitive and confidential, so strictly limiting access to it will be essential to prevent it getting out or into the wrong hands. Working with the HR Department or the Legal Department, or ideally both, will help ensure that confidentiality is not breached during the data collection and reporting process.
Eastridge seeks to establish strong partnerships with our clients to make sure we provide the relevant data to the client in a timely manner and in the format required for reporting to the state. We have already implemented processes to simplify the task of accurate reporting for our clients, and we’ll continue to improve them as more guidance is issued about the new California pay data reporting requirements.