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On September 27, 2022, Governor Gavin Newsom signed into law Senate Bill 1162, which amends Government Code Section 12999 and Labor Code Section 432.3 relating to an employer's obligation for transparency with respect to employee salaries and wages. Effective January 1, 2023, California joins Colorado, Washington, New York City, and other local jurisdictions that have adopted similar requirements. A summary of the new requirements in California are provided below:
1. Wage Transparency. Upon request, all employers, regardless of size, must now provide current employees with the pay scale for their positions. Employers must still comply with the previous law, which mandates employers to provide pay scale disclosures to applicants upon reasonable request. The statute defines "pay scale" as "the salary or hourly wage range that the employer reasonably expects to pay for the position."
Also, employers with fifteen (15) or more employees are required to include the pay scale in job postings. If a third party is used to “announce, post, publish, or otherwise make known a job posting,” the employer is also required to provide the pay scale to the third party and the pay scale must be listed on the job posting.
2. Pay Data Records. All employers must retain records of all job titles and wage rate histories for the duration of an employee’s employment and three years after termination of employment. The California Labor Commissioner has authority to inspect these records. The law creates a rebuttable presumption in favor of an employee’s claim if the employer fails to keep the required records.
3. Pay Data Reporting Requirements. Under existing law, a private employer that has one hundred (100) or more employees must submit a pay data report to the California Civil Rights Department (previously known as the Department of Fair Employment and Housing) or an EEO-1 report covering the prior calendar year. Now, under SB 1162, employers can no longer submit EEO-1 reports in lieu of pay data reports regardless of their EEO-1 filing status.
SB 1162 expands these reporting obligations, requiring employers with 100 or more employees to report the median and mean hourly pay rates in 10 job categories within “each combination of race, ethnicity, and sex." Employers with multiple establishments are no longer permitted to submit a consolidated report and must submit a report for each establishment.
Previous pay data reporting requirements still remain in effect. For instance, employers still must report the number of employees by race, ethnicity and sex whose annual earnings fall within each of the pay bands used by the United States Bureau of Labor Statistics in the Occupational Employment Statistics survey.
The law is unclear as to whether the pay disclosure requirements for job postings will affect California employers who wish to hire remote workers outside of California or non-California employers who are hiring remote workers in California. Further guidance may be issued to help clarify questions that may arise for employers navigating the new law.
The reports are due on the second Wednesday of May each year and the first report is due on May 10, 2023, based upon calendar year 2022 pay data.
4. Separate Report for Labor Contractors. SB 1162 also expands the reporting obligations for employers who have 100 or more employees hired through labor contractors to produce data on pay, hours worked, race/ethnicity, and gender information in a separate report.
5. Required Format. Employers who are subject to the law must submit the required data in a format that allows the California Civil Rights Department to “search and sort the information using readily available software.”
6. Penalties and Potential Civil Action Against Employers Who Violate These Provisions. The law requires the Labor Commissioner to investigate all potential violations and authorizes it to order employers to pay civil penalties upon finding a violation. For instance, employers who fail to file pay data reports may be subject to a civil penalty up to $100 per employee for initial failures to file and $200 per employee for subsequent failures to file. Also, employers who fail to include the pay scale in job postings and do not comply with the record retention requirements may be subject to civil penalties ranging from $100 to $10,000. Any person who is aggrieved by a violation of these provisions may bring a civil action for injunctive and any other appropriate relief.
Takeaways
All impacted employers should implement a compliance plan and review their data reporting obligations, job posting requirements, and records maintenance duties within the company and with their internal recruiters, and should be sure that all job postings are compliant with the new law. Further, employers ought to be looking at the different classifications that exist within their organization and begin to develop clear and identifiable wage ranges for those positions. We are available to discuss your compliance plan and answer any questions regarding pay reporting and pay scale disclosure requirements.
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