California’s NEW Pay Transparency Law: What does it mean for employers?

SB 1162: Pay Transparency

On September 27, 2022, California Gov. Gavin Newsom signed Senate Bill 1162, a broad new pay transparency and pay scale disclosure law that, among other things, requires employers to include pay ranges in all job advertisements beginning on January 1, 2023.

Pay Scale Disclosure Requirements:

Starting on January 1, 2023, SB 1162 expands these requirements by:

1. Requiring employers with 15 or more employees to include the pay scale, meaning the “salary or hourly wage range that the employer reasonably expects to pay for the position,” in any job posting. If the employer uses a third party to publish or post a job, they must provide the pay scale to that third party who must include it in the posting.
2. Requiring all employers, regardless of size, to provide the pay scale for the position in which a current employee is employed, upon request.
3. ?Requiring all employers, regardless of size, to maintain records of job titles and wage rate histories for all employees during their employment and for three years thereafter. These records must be made available to the state’s labor commissioner – who is authorized to inspect these records – so that the labor commissioner can “determine if there is still a pattern of wage discrepancy.” Employers should revise their existing record retention policies to ensure compliance with this new law.

SB 1162 establishes a civil penalty of up to $10,000 per violation of its pay scale disclosure and job posting requirements.

The new law also creates a private right of action for violations of the pay scale transparency law within one year of learning of the violations, and creates a rebuttable presumption in favor of an employee should an employer fail to maintain the records of each employee’s job title and pay rate history for the specified timeframe.

Annual Pay Data Report:

SB 1162 also greatly expands current pay data reporting to now require all employers with 100 or more employees to submit a pay data report to California’s Civil Rights Department (the “CRD”, formally the Department of Fair Employment and Housing) annually on the second Wednesday in May, beginning on May 10, 2023.

The Annual Pay Data Report must include the number of employees by race, ethnicity, and sex within each of the following 10 job categories:

• Executive- or senior-level officials and managers
• First- or mid-level officials and managers
• Professionals
• Technicians
• Sales Workers
• Administrative support workers
• Craft workers
• Operatives?
• Laborers and helpers
• Service workers?

The Annual Pay Data Reports must also include:

• The median and mean hourly rates, within each of the above listed job categories, by race, ethnicity and sex;
• The number of employees by race, ethnicity, and sex whose annual earnings fall within each of the pay bands used by the U.S. Bureau of Labor Statistics in the Occupational Employment Statistics Survey; and
• The total number of hours worked by each employee in each pay band during the reporting year.

Employers with multiple establishments will have to submit a separate report for each covered establishment.

Also, employers with 100 or more employees hired through labor contractors (such as temporary staffing agencies) in the prior calendar year must also submit a separate pay data report to the CRD for these workers and disclose the ownership names of all labor contractors used to supply the workers.

Failure to file the required reports can result in civil penalties of $100 per employee for initial violations, and up to $200 per employee for subsequent violations.

Next Steps: To prepare for the new disclosure requirements, employers should:

• Determine the salary or hourly wage range for all existing positions;
• Maintain job title and pay rate history records in advance of the January 1, 2023 effective date, and going forward in order to ensure compliance with SB 1162’s record-keeping requirements, e.g., document job titles and wage rate histories for every employee during their employment, as well as for three years after the end of employment; and
• For employers with at least 15 employees, review job postings to make certain that pay scale information is disclosed in all job postings going forward.

Employers are encouraged to contact experienced employment counsel for more information and for guidance in ensuring that appropriate policies and safeguards are in place.