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.