Expanding Pay Transparency in California

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With the recent expansion of pay transparency laws in Colorado, New York and Washington, employers should not be surprised that California has also chosen to expand its existing pay transparency laws.

On September 27, 2022, California Governor Gavin Newsom signed SB 1162, which expands the state’s pay transparency laws by requiring employers to provide salary range information and expanding the obligations declaration of salary data for certain employers.

The first of the law’s changes will come into effect on January 1, 2023, but employers should now begin the process of updating their existing organizational policies and procedures to ensure timely compliance with the new regulations when they come into effect. vigor. Here is a brief overview of the existing law and the new requirements set out in SB 1162.

Pay transparency

Prior to the enactment of SB 1162, under current law, employers are required to provide a job applicant with salary range information for the position the applicant is seeking, upon reasonable request. Current law does not require employers to provide existing employees with salary range information for their current positions. SB 1162 now grants California employees the right to request salary range information and adds the additional mandate that employers must include salary range information in job postings. The term “salary range” is defined as “the salary or hourly wage range that the employer reasonably expects to pay for the position”. Effective January 1, 2023, California employers must comply with the following requirements:

  • Employers must provide their employees with salary range information for their current positions, when the information is requested.
  • Employers of 15 or more employees must include in any job posting information on the salary scale for the position to be filled; and
  • Employers must keep records of job title and wage rate history for each employee for the duration of their employment, plus 3 years after employment ends so that the Commissioner of Labor can determine whether there is a trend towards the pay gap.

Payroll data reports

SB 1162 also expands the state’s existing salary data reporting requirements.

Under current law, an employer who has 100 or more employees and who is required to file an Employer Information Report (EEO-1) is also required to submit a Compensation Data Report to the Department of California Civil Rights, which includes information on the number of employees by race, ethnicity, and gender in specified job categories.

In accordance with SB 1162, all California employers, regardless of their EEO-1 filing status, must comply with the following new requirements:

  • Employers are required to file a salary data report, which includes the median and average hourly rate for each combination of race, ethnicity and gender for each job category, both for traditional employees and those hired by subcontractors.
  • Employers must submit a separate payroll data report for employees hired through a labor contractor (defined as an entity that provides workers to a client employer), including name disclosure ownership of all labor contractors used to provide employees;
  • Payroll data reports are now due annually on the second Wednesday in May of each year, with the first such report due May 10, 2023, based on payroll data for calendar year 2022.

SB 1162 still requires employers with multiple locations to provide a report for each location, but removes the requirement to submit a consolidated report. SB 1162 removes the provision of the existing law that allows an employer to submit an EEO-1 instead of a payroll data report.

Under SB 1162, if an employer fails to provide the required report to the California Department of Civil Rights, a court may impose a civil penalty of up to $100 per employee for an initial failure and up to $200 per used for any subsequent failures.

And after?

There are many unanswered questions regarding the new law and its practical application to California employers (i.e., does the new pay transparency law apply to employers who have fewer than 15 employees? working in California, but more than 15 employees company-wide?). While we await further guidance from the state on these matters, employers can start taking steps now to comply with the law in a timely manner.

As a starting point, California employers must assess, confirm, and document salary ranges for all state-based positions.

Employers can also start creating templates for job postings that will be posted after January 1, 2023, to include salary range information. If employers use a third-party vendor to manage job postings, those employers must begin communicating with their vendors to ensure compliance with California’s new pay transparency laws.

It is fair to expect that the new law will prompt demands from current employees regarding pay scales; therefore, employers should also start thinking about training supervisors and HR staff on how to respond.

Finally, employers can determine if it’s time to hire a lawyer and conduct a privileged pay equity audit before pay scale information becomes public on January 1, 2023.

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