California State legislature passes bill for employers to post salaries of job listings; Governor to veto or approve by Sept 30

California State legislature passes bill for employers to post salaries of job listings; Governor to veto or approve by Sept 30

The California State legislature recently passed a law requiring all employers to post salaries for job listings. The law also requires businesses with over 100 employees to disclose pay scales by gender, race and ethnicity. The data relating to the same will available in the public domain. California Gov. Gavin Newsom will either approve or veto the bill by September 30th.

In comparison to the current law which requires the reporting of only numerical counts of employees by race, ethnicity and sex within each job category and pay band, through the new regime all employers will be required to report hourly pay (both median and mean) by each combination of ethnicity, race, and sex for all positions. In addition to this, all businesses over 100 employees hired through labor contractors will also be required to disclose pay data, along with race and gender data. On the other hand, smaller businesses with over 15 employees would also need to post a pay scale for all open positions.

In the event the employer fails to report the aforementioned, he wont be penalised for the first offence as long as the job listings are updated. All businesses of all sizes will also need to deliver pay scales for existing positions if an employee requests this information. Currently, businesses are already legally required to provide applicants with the relevant pay scales for open positions.

The California Chamber of Commerce has however, opposed the bill describing it as a "job killer". It was further stated that with this bill hiring process "more burdensome", as well as "encourage lawsuits against businesses" based on "broad, unreliable data collected by the state". Employers across California, and other states and cities pushing for pay disclosure, are also in opposition. While they say they agree with the importance of pay transparency and equity, employers are unhappy with how these goals are being implemented. Out of the many responsibilities of business owners, hiring and recruitment is one of the most difficult. It takes businesses 36 working days on average to fill an open position, while entry-level positions are most challenging to fill for over 40% of companies. Moreover, 41% of businesses say just one bad hire ends up costing roughly $25,000, Forbes reports.

In addition to an efficient hiring process, choosing the right business structure is also an essential step for business success. Not only does opting for an unsuitable structure result in potential tax ramifications, but it also can potentially result in the business shutting down completely. Most small businesses (around 35%) in the U.S. are limited liability companies (LLCs). An LLC can be formed in any state regardless of where the business is based, although the home state is usually most convenient. Delaware, in particular, is widely considered a business-friendly state and a popular choice for LLC formation. Filing fees and franchise taxes are notably low in Delaware. On the other hand, Florida is similarly considered a business-friendly state where it's more affordable to create and maintain an LLC. The process of how to setup an LLC in Florida is also a relatively simple one. And, since the state has no minimum capital requirement, an LLC can be formed here with any amount of money.

If Governor Newsom approves the bill, the described pay scale disclosure requirements will come into effect on January 1, 2023, while the new pay data reports (including mean and median pay gap information) will be required from May 10th 2023. It's therefore imperative California businesses act now to help ensure compliance by, for example, gathering and assessing data in order to highlight places where changes are needed.