December 1, 2022

Volume XII, Number 335

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Is Pay for Parity or Performance?

California joined the ranks of statutory pay transparency when Governor Newsom signed a bill into law that requires California employers (of 15 or more) to publicize the pay scale for any advertised positions.  The new law, which takes effect on January 1, 2023, poses a host of compliance challenges for employers. Among those challenges is the interpretation and application of the term "pay scale," which the law defines in a self-referencing way as the salary or hourly wage range that the employer reasonably expects to pay for the position. But there are other less obvious consequences that accompany this new law and those consequences begin with existing employees who will voraciously consume the now-public information about the compensation their employers believe worthy of the jobs they already hold. An interesting piece in the Wall Street Journal poisted that success at work (the study at issue in the piece focused on NHL players) could actually be hampered by an open compensation system because once the players learned about the skills their teams really valued (scoring goals), the players focused only on scoring goals instead of the collective team effort that required the sum of many individual parts (here, the parts needed to win hockey games, which in addition to offense, demands a concerted defense to win games). Pay transparency makes it easier for workers to negotiate for better pay because compensation information is equally available to all workers (the parity part). But what may be lost through pay parity is the impact the individual focus has on the team effort that might make a business successful (the performance part). Stay tuned for further guidance about implementing this new law, but in the meantime, employers should keenly focus on what is necessary to inspire the whole of the group to achieve the mission-critical business purpose. 

When he crunched the data, he noticed a paradox. The underpaid players began posting better individual stats after the NHL’s equivalent of wage transparency. They were also worse at helping their teams win games.

https://www.wsj.com/articles/pay-transparency-law-california-nyc-jobs-11663795163?page=1

©1994-2022 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.National Law Review, Volume XII, Number 271
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About this Author

Jennifer Rubin Employment Attorney Mintz
Member

Jen draws on 30 years of experience crafting legal solutions to employment challenges. Her clients include small and large businesses and individual representation of executives. She advises technology, financial services, publishing, retail, professional services, and health care companies seeking regulatory, litigation, and compliance advice. She divides her employment practice between wage and hour compliance and trial practice, with a focus on class actions, trade secrets and employment mobility disputes, and the defense of discrimination, retaliation and other disputes arising from...

858.314.1550
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