Article Update: California Expands Pay Transparency and Data Reporting Requirements

Update 01/19/2023: The California Civil Rights Department has updated its Frequently Asked Questions page regarding pay data reporting to reflect the new requirements flowing from SB 1162. 

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In 2017, California led the nation by passing the first mandatory pay transparency law, which required employers to provide pay scale information to job applicants upon request. New legislation will further expand the state’s requirements. On Sept. 27, 2022, Governor Newsom signed into law Senate Bill 1162, which imposes new pay data disclosure and reporting requirements on California private employers. The new obligations take effect on Jan. 1, 2023.

Pay Transparency in Job Postings – Applicable to Employers with 15 or More Employees

Beginning Jan. 1, 2023, California employers with 15 or more employees must include in any job posting or announcement the pay scale (hourly rate or salary range) for a position. Employers that use a third party (such as an outside recruiting or search agency) to publish job postings must provide the third party with the pay scale, and ensure it is included in the third party’s posting.

Pay Transparency for Current Employees – Applicable to All Employers

All California employers, regardless of size, must provide a pay scale for a current employee’s position at the employee’s request. Employers are also required to maintain records of a job title and wage rate history for each employee for the duration of the employment plus three years after the employment ends. The California Labor Commissioner will have 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.

Pay Data Reporting – Applicable to Employers with 100 or More Employees

Prior to SB 1162, California employers with 100 or more employees had to submit to the Department of Fair Employment and Housing (recently renamed the Civil Rights Department (CRD)) a pay data report tabulating the number of employees within each establishment by race, ethnicity, and sex within each job category (for example, professionals, technicians, laborers, and service workers). Employers also had to report the number of employees by race, ethnicity and sex whose annual earnings fall within each of twelve specific pay bands during the prior year.

SB 1162 expands reporting obligations, requiring employers with 100 or more employees to also: (1) submit a separate pay data report for employees hired through labor contractors (such as temporary staffing agencies) that also discloses the “ownership names of all labor contractors used to supply employees;” and (2) report the median and mean hourly rate for each combination of race, ethnicity and sex for each job category for both traditional employees and those hired through labor contractors. 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. Labor contractors are required to supply all necessary pay data to the reporting employer. If a labor contractor does not cooperate, then a portion of any penalty can be assessed on the contractor. 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 fail to file pay data reports with the CRD may be subject to civil penalty up to $100 per employee for initial failures to file and $200 per employee for subsequent failures to file.

Next Steps for Employers

California employers should take steps now to comply with the new law. A first step is to determine and document salary ranges for all positions with incumbents currently working in California. Employers should also review existing job postings or create new ones for use after Jan. 1, 2023. Employers should also consider partnering with counsel to conduct a privileged pay equity audit, as salary information provided in external job postings will become public on Jan. 1, 2023.

Payne & Fears will continue to monitor additional guidance from the CRD and the Department of Labor Standards Enforcement (DLSE) on implementation of SB 1162.