Senate Bill 1162, a law requiring employers to include pay ranges in all job advertisements, went into effect in California January 1. Here’s how employers are responding.
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It’s been almost two months since Senate Bill 1162, a law requiring employers to include pay ranges in all job advertisements, went into effect in California.
Since then, many employers have eagerly complied. Others have been more resistant to the rule, posting giant pay ranges to both avoid letting candidates know the actual pay and any legal repercussions.
Tesla Inc. is one of these companies. The brand posted a job ad for a software engineer with a salary range listed at $83,200 to $417,600. Similarly, Netflix posted a job with a range of $90,000 to $900,000 before removing the ad after public criticism.
BioSpace has previously reported how similar laws mandating salary transparency affect employers in states like Montana, Colorado and Washington, among several others that have all passed laws requiring employers to provide salary ranges in some capacity.
And though all these states have a biopharma presence, California houses Biotech Bay, one of the busiest biopharma hot spots in the country.
A Lack of Guidance
Elise O’Brien, director at Fennemore Craig Law firm in California, specializes in employment law. She told BioSpace this backlash from companies across the state could be due to a lack of guidance from the state government.
“There’s not a lot of guidance from the respective state agencies as to what needs to be in the job ad,” O’Brien said. “In California, the law basically says that the salary range needs to be what the employer ‘reasonably expects’ to pay for the position.”
She added that the phrase “reasonably expects” has yet to be properly defined, and these giant ranges are a way for companies to “test the waters” so they don’t risk offering employees too much or too little.
This caution is likely due, in part, to a culture shift in attitude about pay and the workforce in general, especially for younger workers. According to Adobe’s Future Workforce Study , published in January, 85% of upcoming and recent graduates say they’re less likely to apply for a job if the company does not disclose the salary range in the job posting.
Ben Michael, founder of Michael & Associates, has years of experience defending workers who have been wronged by their employers. He told BioSpace this reluctance to comply may come down to one simple issue - cost.
“Labor costs are the single biggest expense category for most businesses, meaning that they have plenty of incentive to keep them down by any means they can find,” Michael said. “A great way to keep labor costs low is to hire someone for the lowest possible starting pay, so that even as they gain experience and promotions, they’re still relatively less expensive.”
Though they have become more common since governing bodies like California and New York City passed these laws, the large salary ranges are only the most recent example of employers attempting to get around salary transparency.
Colorado became the first state to pass a salary transparency law in 2021, requiring any employer who hired candidates from the state to include a salary range in every job posting. In response, many companies, including several large life sciences organizations, began excluding Colorado applicants from remote or travel roles, explicitly stating in the job ad that candidates from the state need not apply.
As more states pass laws regarding wage transparency, organizations that want to avoid them have had to be more creative, hence the large ranges.
A Temporary Issue or Lasting Harm?
Though many have benefitted from these laws, some believe that due to issues like employer backlash, they do more harm to employees than good. Brandon Bramley, founder of The Salary Negotiator, an organization that helps employees increase their compensation through negotiation, is one of them.
He told BioSpace this is partly due to a variation in what employers include in the compensation listed. This means one company could post only the base salary, while another could post the salary with all bonuses and equity included.
He added that he believes pay transparency laws often cause candidates to accept a lower-than-market rate due to a decrease in negotiation.
“[Salary transparency laws] have deterred job seekers from negotiating because they think the advertised pay range is set in stone, but we haven’t found that to be the case and have seen companies negotiate above what is posted,” Bramley said. “Recruiters are leaning on these ranges to push job seekers into committing to a number before interviewing, learning more about the role and reviewing the benefits and culture.”
Ultimately, he said, “We’ve only seen how these work against job seekers.”
Larger issues, like the potential reduction in negotiation that Bramley highlighted, may never be solved. Still, O’Brien said smaller issues, like the large pay ranges, are likely temporary.
“I think we’re already seeing less of those postings [with large ranges], just in general,” O’Brien said. “As more states start passing salary transparency laws, I think they are going to ultimately be phased out, just because [companies are] not going to be able to get away from it.”
