How California's Pay Transparency Laws Will Impact the Cannabis Industry

California one-ups Colorado in its new law. But how big of a difference will it make?

It's not just sunshine and legal weed that California shares in common with Colorado. The Golden and Centennial states now share another trait that could have a big impact on the cannabis industry: Pay transparency laws.

And New York City is hot on their trail.

What happened?

California Gov. Gavin Newsom signed into law Senate Bill 1162 on Sept. 27, requiring that employers with 15 or more workers on their payroll to include a pay scale in any job posting. Colorado Gov. Jared Polis signed a similar bill, the Equal Pay for Equal Work Act, in 2019 that went into effect in 2021.

What is a pay transparency law?

Generally speaking, a pay transparency law is a state requirement that employers disclose an approximate pay range in any open job posting. The laws typically also forbid employers from asking about an applicant's wage history, and prohibit workplace rules that prevent employees from discussing their wages with others.

Employers that don't include a pay range in their postings face fines and other penalties. Colorado's law generated about 250 complaints in its first year, according to the Denver Business Journal.

What is the purpose of a pay transparency law?

Pay transparency laws are designed to promote pay equity. Studies show that women, and especially women of color, earn pennies to the dollar compared to men's wages for doing similar — and sometimes identical — work.

The idea behind these laws is that every applicant who applies for a job knows exactly in which range their pay will fall, thus eliminating conscious or unconscious bias in pay.

Is there a difference between pay equity laws and pay transparency laws?

Pay equity laws are spreading across the country, but they're not all the same. Laws in Massachusetts, Oregon, and New Jersey — all legal cannabis states — effectively make illegal pay discrimination based on sex and other protected classes, but may not require pay transparency in job postings.

Many of these laws do, however, require an employer to provide a pay range during the interview process if requested.

And while Colorado's laws were considered among the toughest in the nation when they passed, California has taken things a step further by adding strict new requirements to pay data reporting already required by the state. That means, for example, that pay data reports must now include wages for every job category within their company for each race, ethnicity, and sex.

Both states require companies to keep detailed records of job title and wage history for several years.

How do pay transparency laws impact cannabis companies?

Pay transparency laws in legal cannabis states apply to cannabis businesses just like they do any other business. In California, any employer with 15 or more employees must include a pay range in every job posting, whether they post it themselves or have it posted by a third party. In Colorado, every employer must abide by these rules.

The cannabis industry, especially, has opaque pay structures due to the federally illegal status of the plant. It's why Vangst publishes the Cannabis Industry Salary Guide each year.

"Pay transparency laws provide job seekers, especially those in the cannabis industry, with a better understanding of the of the work-to-pay ratio," Vangst Head of People Operations and Culture Ciera Parks said. "Understanding the duties of the job and equating them to fair pay will allow companies to also understand what the candidate market is requiring from them to be competitive in the job market, especially when compared to other industries."

And with the sector's public struggles in social equity and diversity, these rules could have a big and very real impact.

What are the penalties if a company doesn't follow the new laws?

The penalties are typically financial. In California, employers must pay a penalty of between $100 and $10,000 for each violation. In Colorado, that penalty is between $500 and $10,000. In New York City, which has a pay transparency law that will soon go into effect, the fines could reach a quarter-million dollars.

Both states provide some leniency for a first offense. In Colorado, only one of the 250 companies that had their wrists slapped was actually fined, as they were a repeat offender.

When does New York City's pay transparency law go into effect? And are the requirements statewide?

After a delay, New York City's pay transparency law is scheduled to go into effect on Nov. 1. Fines for noncompliance go as high as $250,000. The New York state Legislature recently passed a similar bill, but it has not been signed by the governor, who is said to be considering it.

Why is California's new law such a big deal?

In short, California's pay transparency law is a big deal because California is a big deal. With its $3.4 trillion economy that makes it the fifth largest in the world, 39 million residents, and with about $1 of every $8 spent in the U.S. being spent by a Californian, laws passed in California tend to have real impact on the entire country. It happened in the 1970s and '80s with car emissions laws, is happening now with new environmental laws, and will likely happen with pay transparency as well.

What can cannabis companies do to prepare for, and ensure compliance with, pay transparency laws?

As pay equity and transparency laws spread across the country along with the cannabis industry, it's critical that companies in the sector adjust their internal policies to be compliant. And while compliance to complicated and complex rules is nothing new for these companies, these particular laws offer a new opportunity for recruitment and employee satisfaction, Parks said, offering these pointers:

"My advice to cannabis companies looking to be compliant with pay transparency is to conduct a compensation analysis of its current workforce and correct any pay equity gaps. Companies need to understand their own pay practices and calibrate within the market. This is going to help them be competitive in the job market, attract good talent and increase retention."