Starting Compensation and Pay Equity in California
As California moves toward a tentative reopening date of June 15, employers may be considering bulking up their workforce again. If hiring new employees, employers should consider the guidance issued by the California Commission on the Status of Women (“Commission”), regarding starting compensation.
The guidance from the Commission first sets forth the applicable California statutes that apply to compensation.
Under California labor Code section 432.3(e), employers are prohibited from:
Seeking salary history from applicants
Relying on salary history information to determine whether to offer employment or what salary to offer
Relying on prior salary to justify the disparity in compensation
The Commission guidance also includes suggested practices for setting starting salaries including:
Determining the company’s compensation philosophy. This includes determining what the company thinks about compensation, what the company values about employees, and what factors are important in recruiting new hires such as experience, training, relevant skills, etc.
Evaluating internal equity. The Commission explains this as considering what current employees are making that do substantially similar work as a new hire. Employers should consider performing a gender and race/ethnicity-based analysis of pay for current employees in substantially similar jobs.
Formulating questions to ask applicants to assess whether the company and the applicant’s expectations align, without asking about prior salary.
Setting salary ranges in advance of interviewing applicants.
It is important that employers document the factors they consider in setting each employee’s pay upon the time of hire. This is not only recommended to ensure that the decision process aligns with the company’s compensation philosophy but can serve as support should an employee bring a claim alleging there was a violation of the Equal Pay Act.