California’s Emerging Wage Transparency Trend

California is a strict state to be an employer; there are numerous laws and regulations in place that require compliance. Wage transparency, or officially named California Equal Pay Act, Labor Code 1197.5 and 432.3, is one of them.

Transparency can be scary to an employer, and if you have had a company-wide practice in place that does not disclose pay range, it may not be easy at first to comply. But comply, we must! I get it; Employers want to have the freedom to pay what they want. But on the downside, this can cause serious conflict within the workplace.

Pay Disparity

Employees commune with each other, and it is only natural to have the subject of pay come up in co-worker conversations. And, under the CEPA Act, you cannot prohibit them from doing so. That means, if Mary asked Fred about his salary, who is in the same role, out of curiosity, and found out that he was making 18% more than she, you have a problem. That problem is Pay Disparity. Pay Disparity can also relate to race or ethnicity. What is scary is that pay disparity claims can go straight to court under the federal Equal Pay Act and the California Fair Pay Act. Here are some numbers of a recent lawsuit; the LA Times settled an equal pay class action case in November of 2020 for $3 million. In January 2021, Western Digital settled a class action for gender bias and unequal pay for $7.75 million. That’s not pocket change.

What you as an employer can do.

The best route to take is to look at your payroll roster. Be honest with your employees about where things are with wages, and if some things are unequal, what will you do to rectify them. It may seem daunting at first or feel like you are losing money for paying higher salaries, but in the long run, it’s economical and will save you from the high costs of a lawsuit. Taking action shows employees that you are on top of things and care that everyone is thriving together.

Being transparent protects you from the potential conflict that can arise from employees finding out things are not equal. The cool thing about increasing pay transparency is that you combat occupational segregation and eliminate discrimination in the workplace. Everyone can be proud of that.

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