The state with some of the most robust pay laws in the nation is now requiring even more from employers. Earlier this week, California Governor Gavin Newsom signed the Pay Transparency for Pay Equity Act (S.B. 1162) into law. Beginning January 1, 2023, certain employers will be required to include salary ranges in job postings, as well supply that information to current employees upon request. The new law also broadens the sphere of employers that must report pay data to the Civil Rights Department (“CRD”) and expands the scope of that report to better identify gender and race-based pay disparities.

Expanded Reporting Requirements
This new law comes just two years after California passed S.B. 973, which required private employers with at least 100 employees to submit a pay data report to the CRD with the number of employees categorized by race, ethnicity, and sex in each job category (e.g., professional, technician, sales workers) and each pay band. Under S.B. 973, the CRD was authorized to aggregate the data and publish a report without identifying individual employers or people. In lieu of the pay data report, however, employers could submit the Employer Information Report (EEO-1) that they were already filing with the Equal Employment Opportunity Commission if it contained the same or substantially similar information.

S.B. 1162, however, requires more. The new law mandates that the pay data report include the mean and median hourly rate for each race, ethnicity, and sex within each job category. One silver lining is that S.B. 1162 eliminates consolidated reports for employers with multiple establishments, but those employers are still required to file a separate report for each location. 

Another key change is the lower employee headcount threshold—employers who hire 100 or more employees through labor contractors must file a separate report for those workers. Employers must file the pay data report and any separate reports by the second Wednesday of May each year.

Disclosing Pay Scales to Employees and in Job Postings
Since 2017, California has required employers, both public and private, to provide an applicant with the salary or hourly wage range for the position for which they are applying upon reasonable request. The Pay Transparency for Pay Equity Act takes it a step further, obligating them to do the same when requested by employees.

Additionally, one of the more prominent and wide-reaching features of the new law is that it mandates employers with at least 15 employees include the salary or hourly wage range the employer reasonably expects to pay for the position. This even applies if an employer contracts with a third party to advertise new positions. Employers must maintain employees’ wage rate history based on job title for the duration of their employment plus three years subject to inspection by the state’s Labor Commissioner to assess whether a pattern of wage discrepancy exists; failure to do so results in a rebuttable presumption in favor of an employee’s claim against the employer.

Violations
Upon suspicion that an employer has violated the pay scale disclosure law, an employee can file a civil action for injunctive or other appropriate relief, or lodge a complaint with the Labor Commissioner. If the investigation reveals an employer disclosure violation, S.B. 1162 empowers the Labor Commissioner to assess a fine of $100 to $10,000 per violation depending on the totality of the circumstances, including whether it is a repeat offense. First-time offenders of the job posting rule will not be fined if they can demonstrate subsequent compliance for all current open positions. Similarly, if an employer fails to follow the reporting requirements, the CRD can request the court impose a fine. The new law vests the court with discretion to fine the offending employer up to $100 per employee for the first failure and up to $200 per employee for subsequent failures.

It’s Time to Start Preparing
California employers have their work cut out for them under S.B. 1162. Before the ball drops on New Year’s Eve, over 200,000 affected companies and organizations will need to be ready with an implementation plan. It is especially important for employers with a large workforce, that have multiple worksites, or that make significant use of labor contractors to start planning now. Additionally, employers with more than 15 employees may want to work internally to identify all open job postings, gather and add the required data, and formulate a procedure for maintaining employee records and applying the data to future postings. Finally, employers throughout California may consider assessing their pay equity practices and reviewing their applicant pay scale disclosure procedures.