On Tuesday September 27, 2022 Governor Gavin Newsom signed into law the California Pay Transparency for Pay Equity Act (SB1162). This new law builds upon pre-existing state fair pay laws and draws the connection between pay transparency and creating a more equitable future. Specifically, the law aims to combat the wage gap on the basis of race and gender in the state of California by requiring employers to disclose salaries of every position within their business along with introducing a state instituted data collection process. The law will go into effect in January 2023.

IWPR research has found that women will not receive equal pay until 2043 in the state of California. However, research shows that organizations that have provided salary transparency have experienced a reduction in pay gap. Consequently, this law is a fundamental step toward pay equity through wage transparency. Studies show increasing wage gaps between groups on the basis of gender and race, and women of color fall within the margins of those most impacted by the widest wage gaps. The wage gap among women of color also varies as wages fluctuate based on race and ethnicity of women. The culture of salary secrecy emboldens employers to continue to discriminate against employees by offering unequal and therefore unfair salaries to their employees.

However, knowledge is power. This law aims to empower employees, particularly of intersecting historically marginalized backgrounds, to be informed of wage discrimination, as well as hold employers accountable. This bill defines the parameters, standards, and frequency of data collection to highlight the reality of wage discrepancies, and it creates worker protection standards mandating employers disclose salary information and protecting employees’ private information.

Specifically, the new law will require employers of 15 or more employees to include salary ranges in all job postings, and to provide current employees with the pay scale for their current position. It also requires that employers with 100 or more contract workers to submit pay data reports, which must be broken down by race, ethnicity, sex, and annual earnings.

By collecting data, the state can assess and address instances of  discrimination on the basis of race, sex, and ethnicity. This is particularly pivotal for women of color whose identities intersect on the basis of these factors and who disproportionately face wage discrimination as a result. Additionally, the provision concerning contractors is vital to mitigating the wage gap as most people who are employed through contract work are individuals of historically marginalized backgrounds. Contract workers are often more vulnerable to exploitation by employers due to the temporary nature of their employment. By mandating that reports include the race, ethnicity, and sex of both salaried and contracted employees, California’s Civil Rights Department can hold private employers accountable for discrimination on the bases of these factors.

By highlighting the issue of pay transparency and making salary inquiry a state protected right, California is directly addressing how pay secrecy perpetuates the wage gap. The law’s emphasis on private employers is particularly pivotal due to pay secrecy being more rampant in the private sector. Additionally, this law protects the privacy of applicants and employees and allows them a fresh new start with economic mobility and advancement regardless of prior pay ranges. Not only do workers and applicants have the right to know the salary ranges for their position, employers can potentially face consequences for denying them this right. Salary transparency ensures employees have the power to negotiate and demand equal pay with their counterparts.

California, following Colorado and New York, is a part of a small handful of states who have taken action regarding mandating salary transparency in the workplace, but the lack of nationwide protections underscores the need for additional steps. IWPR strongly supports both the California Pay Transparency for Pay Equity Act and federal legislation that protects the rights of employees to dispel the veil that cloaks salary information. The Paycheck Fairness Act is uniquely positioned to strengthen protections for workers to openly learn and disclose their salaries. Already passed by the US House of Representatives, it’s past time for the Senate to take action on this legislation and work to close the gender pay gap.