December 2022: Reminder: California Pay Transparency Goes Into Effect In 2023

07 Dec

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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 Governor Newsom signed Senate Bill 1162 (SB 1162) into law, 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.

What are the details?
Effective January 1, 2023, employers must affirmatively disclose pay ranges in job postings. Employers with 15 or more employees must affirmatively disclose the pay ranges for job positions. This includes job listings through third-party staffing agencies.

In addition, if any employee requests to see the pay scale for their current position, the employer must disclose it. Employers must keep records of each employee’s title and wage history. These records must be maintained for the entire employment period and stored for three years after their employment ends.  But employers have until May 10, 2023, to submit their first pay data reports. After that, they must send pay data reports each year on the second Wednesday of May.  Separate reports for employees and labor contractors are required if the thresholds are met: at least 100 employees and at least 100 labor contractors.

What changes does California law SB 1162 make to current pay data reporting requirements? 
The main pay data reporting changes are as follows:

  • In addition to the reporting for employees if an employer has at least 100 employees, an employer must also submit a separate report if there are at least 100 labor contractors 
  • The reports must identify the mean and median pay data for combinations of gender and race/ethnicity
  • The reports must be submitted even if not required to send EEO-1 reports to the Equal Employment Opportunity Commission
  • Failing to report can result in civil penalties of up to $100 per employee and can further increase to $200 per employee for repeat violations

How does SB 1162 California define “pay scale”?
SB 1162 defines “pay scale” as the “salary or hourly wage range that the employer reasonably expects to pay for that position.” 

Are there penalties for failing to disclose pay ranges in job listings?
Penalties for non-compliance have indeed been introduced. For example, civil penalties can soar up to $10,000 per violation if an organization fails to comply with pay disclosure requirements.

How does California law SB 1162 affect employers outside California?
For pay data reports:
SB 1162 requires employers with 100 or more employees, with at least one employee working in California, to submit pay data reports. This means employers from any U.S. state must file a report if they have at least 100 employees and one or more work in California. 

An organization in California won’t be required to file a pay data report if it has 100 employees but none work in California. 

This information is based on the Civil Rights Department’s FAQs for the previous pay reporting law. Though unlikely, it can change. 

For pay scale disclosure:
SB 1162 requires employees with 15 employees or more to disclose pay ranges in job postings. But should employers outside California count all employees or just the ones in California? This is unclear. 

Now that California SB 1162 has been signed into law, the Civil Rights Department may provide further clarification soon. 

For more information, please see the links below:

Previous Vensure Communication (October 3, 2022)

FAQs

Article 1Article 2Article 3

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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