New Law Will Increase Pay Transparency Requirements for California Employers in 2023
On January 1, 2023, Senate Bill 1162 (“SB 1162”) will go into effect, and expand California employers’ requirements regarding disclosure of pay scale information. The new law is intended to increase pay transparency to both existing employees and new applicants. This enactment will create significant changes and obligations for California employers. And it applies to most, if not all, California employers. Specifically, the new law will require:
1. An Increased Disclosure of Pay Information
Employers with 15 or more employees, must provide “pay scales” in all job postings for available positions. A “pay scale” is defined as the salary or hourly wage range that the employer “reasonably expects” to pay for the open position. This obligation will apply whether an employer announces or publishes a job posting itself or through a third-party employment service. Further, and more importantly, all employers must provide current employees’ pay scale information for their position, upon request of an employee.
2. Additional Pay Data Reporting Requirements
Employers will also be required to submit pay data reports to the Department of Fair Employment and Housing (“DFEH”), including the “median” and “mean” hourly rates for employees categorized by each combination of race, ethnicity, and sex. These pay data reports must also be:
- Submitted annually, with the first report due on May 10, 2023.
- Submitted for each establishment if an employer has multiple establishments.
- Submitted for labor contractors. This will require employers with 100 or more employees to submit a separate report that includes data on pay, hours worked, race/ethnicity, and gender information.
Noncompliance exposes employers to harsh penalties. Employers who fail to file pay data reports may be subject to a civil penalty of up to $100 per employee for initial failures to file and $200 per employee for subsequent failures.
3. Record Keeping Obligations
Finally, starting next year, California employers must also maintain records of job title and wage rate history for each employee, during the employee’s employment period plus three years after the employment period. The purpose of this is to ensure access to proof of any historic patterns of wage discrepancy based on race, ethnicity, and sex. The Department of Labor Standards Enforcement may inspect these records upon request.
SB 1162 creates new burdens on employers’ job posting requirements, records maintenance duties, and state reporting requirements. Employers are encouraged to prepare for the upcoming changes now. To ensure legal compliance with these new obligations or discuss your business’ options, please do not hesitate to contact our firm.