Follow up California’s salary disclosure law

Shaun Enders

Earlier this year we wrote about the details of California’s new Salary Disclosure Law, which was enacted in January 2018. While the law was initially seen as controversial, California’s action has led to a number of other states following suit with their own versions of the law.

Sometimes, laws pass and we never hear about them again. In this time of low unemployment and questions surrounding fair compensation and wage stagnation, the Salary Disclosure Law has garnered a great deal of attention. However, even the best intentions can lead to unforeseen outcomes. What is the effect of the law on the current job market and how do we see it playing out for our clients?

The effects of California’s Salary Disclosure Law

The effects of the law have already become evident, especially in the case of highly competitive positions where the supply of qualified applicants is limited. These positions have experienced a noticeable increase in base salary, suggesting that market forces are driving a correction.

Employers are having to set a salary range prior to initiating the hiring process, and are having to stay more flexible and negotiate more with applicants. Candidates are working with peers and advisors to do better research in determining their potential compensation and the value that they bring to the organization.

In addition, both employers and candidates are becoming more aware of the benefits of non-compensatory perks like work-from-home opportunities, favorable schedules, and other intangibles. These can be especially useful for small or mid-sized businesses that may struggle to compete on compensation alone.

At TSG, we understand that current market conditions have forced many employers to adjust quickly to the new realities driven by this update. We are here to help you navigate salary expectations and the negotiation process.

For candidates, we understand the difficulties of properly determining your potential compensation and the anxiety that comes with negotiating for a position you really want. We work with you so that you have the confidence of knowing your worth in today’s market and how to properly articulate it.

While all of these changes can be difficult, both for managerial and HR professionals, as employees we understand the emotional and financial impact of an effective salary negotiation, both for the employer and for the potential employee.

In our view, the new salary disclosure law is a step in the right direction and puts more responsibility on each employer to educate themselves on current market conditions, rather than relying on previous pay history. The fact that other states have followed California’s lead in this area is further proof that the ultimate impact for both businesses and employees is a positive one.

Frequently Asked Questions About Updates to California Labor Code Section 432.3

If you’re still getting up to speed on the law’s January 1 updates, here’s a quick refresher to help you ensure you are in compliance.

  • What types of questions are employers prohibited from asking?

Employers are not allowed to ask about prior salary, bonuses, or other monetary compensation. In addition, they are not allowed to ask about the monetary value of other types of compensation, including equity stakes, health insurance, or other types of benefits.

  • How can recruiters help ameliorate the effects of the update?

Recruiters are bound by the same restrictions as employers and are not allowed to ask for salary information. However, because they are familiar with both broad, industry-specific salary ranges as well as localized micro-market norms, recruiters are able to help both employers and candidates determine an appropriate salary range for a particular position.

  • What happens if a candidate volunteers salary information?

As long as the information is given “voluntarily and without prompting,” employers may take it into consideration among other factors in their decision-making. It is probably a good idea to record the voluntary disclosure and take steps to show that the salary information was not used as the sole factor in determining the applicant’s suitability or compensation.

  • What type of information must an employer provide to an applicant?

Upon “reasonable request,” either written or verbal, employers must provide a “pay scale” to potential employees. In order to comply, it is a good idea to implement salary bands or other guidelines for compensation in case such a request is made. It is also a good idea to keep a record of applicants who ask for such information, and to document your compliance with their request.

For a more in-depth discussion of the ins and outs of the disclosure law, check out our previous post from January. Want to discuss an upcoming opening and take advantage of our expert, market-driven advice on salary ranges and alternative compensation strategies? Our expert recruiters are here to help you stay in compliance and compete more effectively for top candidates. Let’s talk!