Stay Informed

California recently joined several states across the country to implement pay transparency laws.

Originating with Senate Bill (“SB”) 1162, approved by Gavin Newsom in September 2022, and subsequently codified with Labor Code section 432.3, California’s laws implement new pay transparency and pay data reporting requirements for employers. These laws strive to reduce the gender and race gaps, the thought being that more transparency will give prospective and current employers information about a role to prevent a large gap in pay between peers. The new salary transparency requirements went into effect on January 1, 2023, and the 2022 pay data reports are due on May 10, 2023.

Pay Data Reporting Requirements

Private employers with 100 or more employees must report pay data of their employees and contractors by race, ethnicity and gender. California’s pay data reporting law was initially enacted in 2020 with SB 973, but was updated with enhancements with the recent SB 1162, and codified in the California Government Code section 12999.

The California Civil Rights Division (“CRD”) recently released updated guidelines for this year’s reports which are due on May 10, 2023. Along with the change to the due date for the reports, the key updates to this year’s reports are as follows:

• Under the new law, employers must calculate and report the mean and median hourly rate for employees by job category, location, pay band, race, and sex.
• Employers with 100 or more workers hired through labor contractors must file a Labor Contractor Employee Report. The employer only needs to file one report to cover all locations.
• The CRD may seek a monetary penalty against any employer who fails to file a report.

Should an employer need additional time to complete their Labor Contractor Employee Report, they may seek an “enforcement deferral request” through the CRD, which will defer the deadline to July 10, 2023.

Salary Transparency

In addition to the updated pay data reporting requirements, a salary transparency law that went into effect earlier this year requires employers (both private and public) with 15 or more employees to follow wage disclosure requirements.

An employer is required to provide a pay scale for all advertised job openings, and include this information to third parties advertising a position. Pay scale is defined by the statute as the salary or hourly wage range that the employer reasonably expects to pay for the position. In addition to the pay scale disclosure for applicants, the statute also requires employers to provide pay scale data to current employees upon request.

The statute also imposes a data retention requirement. Employers must maintain records of job title and wage rate history for each employee for the duration of the employment plus an additional three years. The employer must make these records available for inspection by the Labor Commissioner.

Under Labor Code section 432.3, an aggrieved employee or applicant can bring a civil action for injunction relief or any other relief the court finds appropriate. Employers who are found to have violated these requirements may be ordered to pay a civil penalty between $100 and $10,000 per violation, as deemed appropriate by the Labor Commissioner. No penalty will be imposed if it is the employer’s first offense and all job postings have been updated.

Takeaways

California’s pay transparency laws and reporting requirements are a positive step towards achieving pay equality across race and gender, but provide more compliance requirements for the covered employers.

Covered employers should ensure that all job postings contain the required pay scale information and ensure that their upcoming 2022 pay data reports meet the updated guidelines.

For more information or specific guidance, please contact Shahirah Ruddell.