Why would corporate software be incentivized to recommend a pay band any higher than the least the employee would take? The incentives are not aligned

Choosing a pay band based on performance and setting the pay bands as low as they can losing all their employees are orthogonal.

Suppose you are an employer and you have 5 junior engineers. You wish to promote one to senior engineer, which includes a move to a higher pay band. How do you decide which one gets the promotion?

Most companies are going to decide which one to promote at least partly based on performance data. Do they consistently finish things on time? What is the defect rate in their work? Do they work well with others? Do they need a lot of help compared to their peers or are the who their peers turn to when the peers need help? Does their work show skill above what would normally be found in junior engineer work?

From what has been quoted by or about the objects that one representative had it is that he thinks the bill has been written too broadly and could be construed as prohibiting using job performance data like that in deciding promotions.

Most companies want not the least an employee will take right now, but the least that will keep that employee around rather than jumping ship.