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October 2022: California Expands Pay Transparency Requirements

03 Oct

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Update Applicable to:
All employers in the state of California.

What happened?
In our previous communication here, we notified you that the California Legislature passed Senate Bill 1162 (SB 1162), which expands pay transparency and reporting requirements for employers doing business in California, amending Section 12999 of the California Government Code and Section 432.3 of the California Labor Code. This is an update to that communication.

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What are the details?

Effective January 1, 2023, employers will be required to disclose more pay data and provide pay ranges on job postings and to requesting employees, to increase pay transparency for applicants and employees. The signing of SB 1162 makes California the largest state that requires the affirmative disclosure of pay scale information and takes the state a step further in its pay transparency efforts, by requiring that employers add mean and median pay data as well as pay data of employees supplied by labor contractors in pay data reports.

More Robust Pay Data Reporting Begins with the May 10, 2023 Pay Data Report

Proponents of SB 1162 believe that California’s current pay data reporting law does not go far enough in its requirements for employers. The Governor and First Partner agreed, as they highlighted after meeting with the Legislative Women’s Caucus to promote the passage of SB 1162 and other gender-related bills.

SB 1162 makes the following changes to requirements regarding employer pay data reports under Government Code Section 12999:

  • Within each job category, employers must report the median and mean hourly rate by each combination of race, ethnicity, and sex.
  • Reports are now due annually on the second Wednesday of May. The first report is due on May 10, 2023, based upon calendar year 2022 pay data.
  • Employers with multiple establishments are no longer required to submit a consolidated report. These employers must continue to submit a report for each establishment.
  • Employers that have 100 or more employees hired through labor contractors have a new obligation to produce data on pay, hours worked, race/ethnicity, and gender information in a separate report.
    • Note: The law requires labor contractors to “supply all necessary pay data to the private employer,” but does not contain a separate mandate for the labor contractors to collect the “necessary pay data,” nor does it define the data required or address issues with regard to timing of these disclosures. The law also allows courts to apportion an “appropriate amount” of any penalties to any labor contractor who failed to provide required pay data to the employer.

Employers who fail to file pay data reports may be subject to a civil penalty up to $100 per employee for initial failures to file and $200 per employee for subsequent failures to file.

Pay Scale Disclosures

SB 1162 also makes significant changes to California’s pay scale disclosure law under Labor Code Section 432.3.

Current law in California requires employers to provide candidates for employment the pay scale for the position the candidate is seeking only upon request. As of January 1, 2023, employers must also comply with the below requirements:

  • Employers with more than 15 employees must include a pay scale in all job postings (and to provide that information to third parties who post those jobs).
    • Note: No penalty will apply for a first violation of this requirement if the employer can show that all job postings for open positions have been updated to include the pay scale.
  • All employers, regardless of size, must provide a pay scale for a current employee’s position at the employee’s request.

Labor Code Section 432.3 defines pay scale as the salary or hourly wage range that the employer reasonably expects to pay for the position.

Pay Data Record Retention Requirement

SB 1162 also introduces a record retention requirement. Employers must maintain records of job titles and wage rate histories for the duration of an employee’s employment and three years after termination of employment. The California Labor Commissioner will have the authority to inspect these records.

Failure to comply with the pay scale disclosure or record retention requirements can result in penalties ranging from $100 to $10,000 per violation.

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For more information, please see the links below:

Senate Bill 1162 (SB 1162)

Previous Vensure Communication (9/14/2022)

Office of Governor Gavin Newsom Article

Article 1

What do employers need to do?

Employers should review the links provided above and prepare to make adjustments to their data reporting policies and job postings to ensure they are in compliance with the law come January 1, 2023.

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This communication is intended solely for the purpose of conveying information. The present post might incorporate hyperlinks directing readers to websites managed by third-party entities. The inclusion of any links within this communication is meant to serve as points of reference and could encompass opinion articles from various law firms, articles from HR associations, official websites, news releases, and documents of government agencies, and other relevant third-party sources. Vensure has no authority over these external websites and bears no responsibility for their content. Furthermore, Vensure does not endorse the materials present on these websites. The contents of this communication should not be interpreted as legal advice or as a legal standpoint concerning specific facts or scenarios. Nor should it be deemed an exhaustive compilation of facts potentially pertinent to federal, state, or local laws. It is strongly advised that employers solicit legal guidance from an employment attorney when undertaking actions in response to any legal updates provided. This is due to the possibility of future alterations occurring in federal, state, and local laws, regulations, as well as the directives and guidelines issued by governing agencies. These changes may transpire at any given time, potentially rendering certain portions of the content within this update void or inaccurate.

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