California passes new law to address gender and racial wage gaps

Sacramento, California - California companies with 15 or more employees will be required to list salary ranges for all job postings under a law signed by state Governor Gavin Newsom this week.

California's new law will require companies with 15 employees or more to list salary ranges for all job postings (stock image).
California's new law will require companies with 15 employees or more to list salary ranges for all job postings (stock image).  © 123RF/pressmaster

It is set to take effect in May 2023, bringing California in line with US states such as Washington, Colorado, and Connecticut that have passed similar wage transparency laws in recent months.

It builds on previous legislation signed in 2020 which requires companies with more than 100 employees to submit wage data to the state's Department of Fair Employment and Housing.

"This is a big moment for California workers, especially women and people of color who have long been impacted by systemic inequities that have left them earning far less than their colleagues," Senator Monique Limón, the bill's author, said in a statement Tuesday. "As we continue to build a sustainable economy, we must ensure every worker is paid equitably."

Supporters of the new law pointed to recent studies that analyzed pay data collected and found widespread gender and racial inequity.

A study conducted by Trusaic, a software company that helps businesses address gender-based pay disparities, found that in 2020, women in California earned $46 billion less than men and that people of color earned $61 billion less than their white counterparts.

A separate study, published by the state this year, further showed that despite men and women being employed at the same rate, men accounted for 64% of top earners, while women accounted for 36%.

The study, which relied on data from more than 6 million workers, also revealed that Latino and Black workers were overrepresented in low-wage jobs that pay $30,679 or less a year, whereas their white and Asian counterparts tended to earn more.

"One contributor to the wage gap is that pay disparities are often 'hidden from sight' and worsen when no one is actively monitoring hiring practices," the California Employment Lawyers Association wrote in support of the bill.

"Thus, employees and in many cases employers themselves – especially in larger companies – may not be aware of gender or race-based pay disparities that exist in their workforce."

California's new law should help workers negotiate pay

Data show that women in California and across the US still make less for every dollar that men earn (stock image).
Data show that women in California and across the US still make less for every dollar that men earn (stock image).  © 123RF/halfpoint

In 1996, when the US established Equal Pay Day, women earned around 74 cents to every dollar a man earned. The gap has narrowed only slightly, with the 2020 census showing that women earned about 83 cents to the dollar.

The new law aims to equip workers with more leverage when negotiating pay. Lawmakers referenced a study conducted by the National Women's Law Center finding that when companies disclosed salary ranges upfront, women and people of color were more willing to negotiate and more successful in negotiating.

Workers can file a grievance if they believe a company is in violation of the law. Employers that break the law can face a civil penalty of $100 to $10,000 per violation.

The new law also seeks to collect more employment and wage data, expanding the companies that must provide such information to include those with more than 100 workers hired through labor contractors.

Industries that rely heavily on contract work, such as custodial services and maintenance, often employ high rates of immigrants, low-wage earners, or other workers vulnerable to labor violations, lawmakers in the Senate's Committee on Labor, Public Employment and Retirement wrote in their analysis of the bill.

"This additional data could be important for anti-discrimination enforcement and targeted state programs," the committee said.

The California Chamber of Commerce, which opposed the bill along with a wide variety of trade groups, protested a portion of an earlier version of the bill that would have given the state the authority to publish a private company's pay data, which the group said would "target employers" in "a cynical and disingenuous manipulation" of data.

Cover photo: 123RF/halfpoint

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