California Legislature Expands Employer Obligations Regarding Payroll Transparency

Stoel Rives - World of Employment

Stoel Rives - World of Employment

Seemingly with every passing day the California legislature adds more obligations (and opportunities for costly missteps) to California employers.  This time we are discussing California Senate Bill 1162, dubbed California’s Pay Transparency Law (“SB 1162”).  SB 1162, which goes into effect beginning January 1, 2023, expands on the already high-level disclosure payroll requirements governing California employers.  SB 1162 also adds to the ever-growing list of administrative headaches that employers are required to keep track of, in the words of University of Berkeley alum Marshawn Lynch, “so they don’t get fined.”

Pay Data Reporting

To begin, SB 1162 expands on California employers’ duties to provide pay data reports to the California Civil Rights Department (“Department”).  Under the prior law, private employers that had 100 or more employees and that were required to file an annual Employer Information Report (EEO-1) pursuant to federal law also had to submit a similar report to the Department on or before March 31, 2021, and on or before March 31 each year thereafter.

SB 1162 expands on this existing requirement in five significant ways.  First, SB 1162 requires all private employers with 100 or more employees to submit a pay data report to the Department regardless of whether they were required to submit an EEO-1 report under federal law.

Second, SB 1162 changes the deadline to submit the report to the Department from March 31 to the second Wednesday in May 2023 and each year thereafter on or before the second Wednesday of May.

Third, and in addition to including in the pay data report the number of employees by race, ethnicity, and sex in specified job categories, SB 1162 also requires employers to include information regarding the median and mean hourly rate for each combination of race, ethnicity, and sex within each job category, as well as the number of employees who fall within each of the pay bands used by the U.S. Bureau of Labor Statistics.[1]

Fourth, SB 1162 expands reporting requirements to not only include all employees directly hired by the employer but also employees hired through labor contractors.  Specifically, employers that hired 100 or more employees through labor contractors, such as staffing agencies, must submit a separate pay data report covering these employees and disclosing the ownership names of all labor contractors used to supply these employees.

Fifth and finally, employers are now permitted, but are not required, to include on the report a “clarifying remarks” section to add any additional information that they feel would be relevant for the reviewing body to have.

Failure to comply with SB 1162’s pay reporting requirements may result in civil penalties up to $100 per employee for initial failures to file and $200 for subsequent failures to file. 

Pay Disclosure

In addition to expanding on employers’ duties regarding the submission of pay data reports, SB 1162 also requires (1) employers provide to current employees upon request the “pay scale” (defined as the salary or hourly wage range that the employer reasonably expects to pay for the position)  for the position in which the employee is currently employed and (2) employers with 15 or more employees to include in any job posting the “pay scale” for the open position.  

Further, California employers are now required to maintain records of job titles and corresponding wage rate histories for the duration of the employee’s employment plus three years after the employee’s employment has ended. 

Failure to comply with either of these requirements can result in penalties that range from $100 to $10,000 per violation. 

Steps for Compliance

California employers should immediately take steps to prepare for the new requirements imposed by SB 1162.  Specifically, employers should review their policies with respect to self-identification, along with maintenance of wage-related records.

Given the complexities and administrative headaches that SB 1162 imposes on employers, California employers are strongly advised to work with experienced employment counsel and immediately take steps to ensure they can comply by the January 1, 2023, deadline, as well as prepare for the pay data report submission deadline of May 10, 2023.


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Stoel Rives - World of Employment

Stoel Rives - World of Employment on:

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