All Employers Impacted by New Pay Transparency Rules for California Jobs Starting in 2023

APPLIES TO

All Employers with CA Applicants and Employees

EFFECTIVE

January 1, 2023

QUESTIONS?

Contact HR On-Call

SB 1162 increases employer requirements for disclosing pay scales in job postings and increases requirements for both applicants and employees. Additionally, the bill increases the types of pay data required to be reported to the state. The following are key requirements employers should note.

Pay Transparency Requirements. For the past few years, employers have been required to provide a position’s pay scale upon request by a California job applicant. The current bill adds new disclosure requirements for applicants as well as expands the disclosure requirements to current employees.

“Pay scale” has been clarified to mean the “salary or hourly wage range that the employer reasonably expects to pay for the position.”
The bill removes the requirement that applicants must make the pay scale request after an initial interview. Now, applicants will be able to make the request at any point in the recruiting process.
Employers with 15 or more employees must include a position’s pay scale in all job postings. Employers must provide the pay scale to third-party job posters who are also required to include the pay scale in job postings.

Upon request, employers must provide existing employees with their position’s pay scale.
Employers must maintain records of job title and wage rate history for all employees for three years following termination. Failure to maintain required records will result in a rebuttable presumption in favor of the employee’s claim.

Individuals may file a complaint with the Labor Commissioner or bring a lawsuit for violations of the disclosure requirements. Civil penalties may be awarded for $100 to $10,000 per violation. There is a safe harbor for a first violation where no penalty is assessed if the employer updates their open positions to include the required pay scale.

These new requirements may leave employers with questions about how to manage their obligations.

Which employers are covered by these requirements? These requirements apply to all employers who may be hiring in California or have employees in California, even if they may be or are working remotely from California.

Do employers outside of California need to comply with the posting requirements? If an out-of-state employer is hiring for positions within California, or if there is a possibility that someone may be hired to work remotely in California, employers across the country must comply with the pay scale posting requirements.

Can employers create different job postings for inside and outside California? One possible way of managing California requirements would be to create two job postings, one for non-California-based applicants and employees, and another for California-based applicants and employees. However, limiting language would need to be included in the non-California based job posting. Keep in mind that the ability to separate postings is not currently addressed in the bill and may be closed by future regulations.

Will these disclosure requirements be a new trend? Colorado and Washington already have disclosure requirements. New York state will soon join New York City in adding similar requirements. Other jurisdictions also have varying degrees of disclosure requirements. Employers should consider implementing one process compliant with all locations to avoid having to manage carveouts across multiple jurisdictions. Note that in 2021, Colorado guidance restricted employers’ ability to exclude Colorado applicants from job postings only in instances where the work was performable only at non-Colorado worksites, and required job postings for work that could be remotely performed anywhere to comply with the rules.

Pay Data Disclosure Requirements. Since 2021, all employers (regardless of location) with 100+ employees must annually submit expanded EEO-1 reporting data to the state Civil Rights Department if they have at least one employee in California. Going forward, annual reporting has been moved from March 31st every year, to the second Wednesday in May. The next required reporting will be May 10, 2023. Several other changes were made to the reporting requirements.

Employers with 100 or more employees hired through labor contractors will now be required to submit a separate pay data report for those labor contractors. “Labor contractor” means an individual or entity that supplies a client employer with workers to perform. A court may sanction any labor contractor who fails to provide pay data to the employer.
The required data is expanded to include the median (middle) and mean (average) hourly rate within each job category for each combination of race, ethnicity, and sex.
Employers with multiple establishments no longer need to submit a consolidated report for all employees; however, employers must still submit a report covering each establishment.

Civil penalties for violations will be $100 per employee for failure to file a report, and $200 per employee for a subsequent failure to file a report.

The state’s website has helpful information on current pay data reporting requirements and will likely be updated once the new law goes into effect.

Action Items

Review the bill here.
Determine pay scales for all job positions.
Implement or update job descriptions for all positions.
Have an audit conducted for equal pay compliance.
Coordinate pay scale disclosures with third-party recruiters, if applicable.
Update data collection procedures for pay data disclosure on May 10, 2023.
Subscribers can call our HR On-Call Hotline at (888) 378-2456 for further assistance.

Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser. © 2022 ManagEase