The Unexpected Consequences of Compulsory Pay Transparency: Unintended Harm from Forced Compliance

It’s been two months since California’s Senate Bill 1162, requiring employers to include pay ranges in all job advertisements, took effect – and employers in the state are already feeling the impact. This new law is transforming the way that employers advertise positions, and giving job seekers in California more information to make informed decisions.

Since its implementation, employers have had mixed reactions to this rule. While some have quickly complied, others have been more hesitant, opting to display giant pay ranges rather than revealing the actual pay to avoid potential legal issues.

Tesla Inc. and Netflix have made headlines recently for their extraordinary salary offerings for software engineers. Tesla posted a job ad offering a salary range of $83,200 to $417,600, while Netflix initially listed a range of $90,000 to a whopping $900,000 before removing the posting. These companies have set the bar high for software engineering salaries, making them a top choice for job seekers.

An increasing number of states have passed laws requiring employers to provide salary ranges to potential employees, including Montana, Colorado, and Washington. These laws are designed to promote salary transparency and ensure that prospective workers are aware of their pay potential before agreeing to a job. By providing salary ranges upfront, these laws are helping to level the playing field for applicants and ensure that workers are compensated fairly for their efforts.

California is home to Biotech Bay, one of the most vibrant biopharma hubs in the United States. Here, some of the leading biopharmaceutical companies from around the country come together to collaborate on cutting-edge research and development. With its thriving ecosystem of universities, research institutes, venture capitalists, and startup companies, Biotech Bay is a cornerstone of the biopharma industry.

A Lack of Guidance

Elise O’Brien, a prominent director at Fennemore Craig Law firm in California with a specialty in employment law, has suggested that the recent backlash from companies across the state may have been provoked by the lack of clear guidance from the state government.

Are you a job-seeker in California? If so, you may be surprised to learn that there is surprisingly little guidance from state agencies about what needs to be included in job ads. According to California law, employers are only required to provide the salary range that they “reasonably expect” to pay for the position. So, make sure you do your research and know what to expect before you apply!

The phrase “reasonably expects” has yet to be fully understood, so companies are using the wide range of salaries that are offered as a way to “test the waters” in order to make sure they don’t give employees too much or too little. According to one expert, this is an effective way to determine which salaries are appropriate and reasonable.

The workplace is undergoing a cultural transformation, and younger generations are leading the charge. According to Adobe’s Future Workforce Study, 85% of upcoming and recent graduates are less likely to apply for a job if the company does not disclose the salary range in the job posting—a sign of the changing attitude about pay and the workforce. This shift in attitude is causing employers to be more cautious when it comes to setting pay.

For years, Ben Michael – founder of Michael & Associates – has been a staunch advocate for defending workers who have been wronged by their employers. His insight has revealed that the primary reason employers are hesitant to comply with regulations may be the hefty costs associated with doing so. His passionate work has made a lasting impact on ensuring workers’ rights are respected.

Labor costs are the biggest expense for companies, so they are always looking for ways to manage them. One of the most effective strategies for keeping labor costs low is to hire experienced workers at a lower starting pay, so that even as they gain experience and promotions, they remain cost-effective. This approach can be a win-win, allowing businesses to save money while providing employees with valuable opportunities for growth.

The implementation of large salary ranges has become increasingly prevalent as governing bodies like California and New York City pass such laws. However, these salary ranges are merely the latest in a series of attempts by employers to dodge salary transparency.

In 2021, Colorado made history by becoming the first state to pass a salary transparency law, requiring employers who hire candidates from the state to include a salary range in all job postings. Unfortunately, this landmark legislation has had some adverse effects: several large life sciences organizations have now excluded Colorado applicants from remote or travel roles, citing the new law as the reason why. Nevertheless, the new law has opened up a much-needed dialogue about salary transparency and is encouraging more employers to keep salaries transparent and fair.

As wage transparency laws become more commonplace, organizations have had to get crafty in order to get around them. This has resulted in wide-ranging salaries for similar positions, creating a new challenge for employers.

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