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What the New Pay Transparency Law Means for Employers

In 2023, employers in California will be required to make their pay scales available to job applicants and employees. In addition, pay data reporting requirements have changed. What do these changes mean for employers?

Governor Gavin Newsom signed  SB 1162, into law on September 2, 2022, amending California Government Code section 12999 and California Labor Code section 432.3. One goal of the legislation was to “strengthen California’s commitment” to gender equity and the protection of women’s rights, the governor’s office noted, by making pay scale information available to job applicants and current employees.

The pay scale piece of the legislation affects all employers, with the additional requirement that salary or hourly rate ranges be included in job postings for employers with 15 or more employees.

The pay data reporting changes apply to employers with 100 or more employees, who must now annually report “within each job category, for each combination of race, ethnicity, and sex, the median and mean hourly rate” of pay.

Employers faced with navigating the expanded reporting and pay transparency requirements should be aware of the specific details of the new legislation.

Changes to the Pay Transparency Law

California laws on pay transparency are legislated by the California Labor Code § 432.3, which requires that:

  • An employer may not seek a job applicant’s prior salary history to determine whether to offer employment. However, if the applicant voluntarily, without prompting, discloses salary history, the employer is not barred from “considering or relying” on that information in determining a salary offer. But keep in mind that this history can’t justify a disparity in compensation.
  • An employer may not seek a job applicant’s prior salary history as a factor in the salary offered for employment.
  • An employer will provide to a job applicant “upon reasonable request” the pay scale for the position s/he is applying for.

The passage of SB 1162 enacts additional requirements:

  • An employer will provide an employee, upon request, the pay scale for the position the employee currently holds.
  • An employer with 15 or more employees must include the pay scale in all job postings. This applies to any third party the employer uses to post or publish a job opening.
  • An employer must keep records that record the job title and the wage rate history for each employee and keep those records for three years after the end of employment.
  • A person claiming “to be aggrieved” by a violation of these requirements has one year from the date s/he learned of the violation to file a written complaint with the Labor Commissioner and also may bring civil action against an employer for the claimed violation.
  • Penalties for violating this section of the Code are not less than $100 and not more than $10,000 for each violation.
  • Penalties for a first-time violation of not including pay scales in job postings will be waived if the employer demonstrates that postings for open positions have been updated to include that information.

Changes to Employer Reporting

Employers with 100 or more employees already must report employee data each year that includes employee sex, race and ethnicity in 10 separate job categories, from executive to laborers and service workers. SB 1162 adds the following requirements:

  • Within each job category, the employer must submit the mean and median hourly wage rate for each “combination of race, ethnicity and sex.” The 10 employee job categories are:

       – Excecutive or senior level officials and managers.
       – First or mid level officials and managers.
       –  Professionals.
       – Technicians.
       – Sales workers.
       – Administrative support workers.
       – Craft workers.
       – Operatives.
       – Laborers and helpers.
       – Service workers

  • A separate report is required for each establishment an employer owns.
  • Employers who use labor contractors must submit a separate pay data report for employees hired through the contractors.
  • The reports are now due the second Wednesday of May beginning in 2023. Previously, the reports were due on or before March 31.

Navigating the new requirements and reporting complexities are additional burdens for employers but having an expert employment attorney on your side will help you avoid potential violations of the new requirements and the penalty costs they can incur. To speak with a Law PLA attorney, schedule a consultation through either of our Los Angeles offices or online. Be assured that our skilled attorneys can guide you every step of the way.

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