Pay Transparency is Coming to California
Published: October 11, 2022
How much does that job pay? According to a new law coming to California, employers must not hide that information from employees who ask. And applicants will not even need to ask. On September 27, 2022, Governor Newsom signed into law SB 1162, which provides for pay transparency among job postings for most California employers.
Pay Range in Job Postings
Under the new law, beginning January 1, 2023, employers with at least 15 employees will be required to include a pay scale with any job posting. The law defines “pay scale” as “the salary or hourly wage that the employer reasonably expects to pay for the position.” Presumably, then, the posting need only include a range for salaries or hourly rates and will not need include other aspects of employee compensation such as bonuses, commissions, or benefits. In addition, if employers use third-party services to post jobs, they will need to provide those third parties with the pay scale information so that it can be included in the job posting.
While employers do not have to volunteer such information to existing employees without prompting, those employees are entitled to the same pay range for their own positions if requested. The requirement to provide pay ranges to existing employees upon request applies to all employers, regardless of size.
Pay Data Reports for Larger Employers
Larger employers who currently file EEO-1 reports will have additional obligations. By the second Wednesday of May 2023, employers with 100 or more employees will be required to submit pay data reports to the Civil Rights Department. The reports will need to include the median and mean hourly rate for each combination of race, ethnicity, and sex within each job category. These reports will need to be filed annually by the second Wednesday of each May thereafter, and it will no longer be sufficient to submit EEO-1 reports in lieu of pay data reports.
Employers will also be required to maintain records for job position and wage rate history for each employee until three years after the employment relationship ends.
Enforcement Mechanisms
Any employer who fails to comply with the above requirements could be subjected to fines of $100 all the way up to $10,000 per violation. Employees who are aggrieved by any noncompliance will also be able to pursue civil actions against their employer, and there will be a rebuttable presumption in favor of the employee’s claim if employers fail to maintain employment records as set forth above.
Next Steps for Employers
Employers should use the time between now and January 1, 2023 to create pay ranges for each job position that does not already have one. If working with third-party companies to publish job postings, employers should make sure that they provide those third parties with the required pay scale information. Larger employers should begin compiling the necessary data to ensure they are able to produce pay data reports in compliance with the new law by May 2023. Finally, because these transparency laws are ultimately aimed at curbing out discriminatory pay practices, this is a good reminder for employers to work with counsel to audit their pay ranges to assess whether any discrepancies exist by race, ethnicity, or gender. If any discrepancies are identified, employers should take appropriate measures to address and, if necessary, correct them.