On September 27, 2022, Governor Gavin Newsom signed California's Pay Transparency for Pay Equity Act (SB 1162). The new pay transparency requirements apply to California employers with fifteen (15) or more employees and will take effect on January 1, 2023. California joins the growing list of states and cities, such as Washington state and New York City, passing pay transparency laws.
Starting January 1, 2023, employers with fifteen (15) or more employees are required to include salary or hourly wage ranges for job postings. Employers do not need to include bonuses or equity-based compensation in the job posting. This requirement applies to any internal or external job posting, as well as job postings published by a third party at an employer's request.
SB 1162 also requires employers to provide current employees with the pay scale for the position in which they are currently employed, upon their request. Additionally, if requested by the applicant, employers must also disclose this information to external applicants seeking employment with the employer.
Civil Penalty for Violations of SB 1162
Employers who fail to comply with SB 1162 may receive a civil penalty of up to $10,000.00 per violation. Employers can avoid a penalty for the first violation if they are able to demonstrate that all job postings for open positions have been updated to include the pay scale.
Annual Pay Data Report
The pay transparency requirement also amends the Annual Pay Data Report requirements. Private employers with 100 or more employees must file an annual report with the Civil Rights Department that discloses specific pay data according to race, ethnicity, and gender within each of the following job categories:
- Executive- or senior-level officials and managers
- First- or mid-level officials and managers
- Sales Workers
- Administrative support workers
- Craft workers
- Laborers and helpers
- Service workers
Employers must also disclose the following information in the Annual Pay Data Report:
- The number of employees by race, ethnicity, and gender in the above 10 categories;
- Within each of the above job categories, for each combination of race, ethnicity and gender, the mean and median hourly rate (using W-2s);
- The number of employees by race, ethnicity, and gender whose annual earnings fall within each of the pay bands used by the U.S. Bureau of Labor Statistics in the Occupational Employment Statistics Survey (using W-2s);
- The total number of hours worked by each employee counted in each pay band during the reporting year; and
- For covered employers with multiple establishments, there must be a separate report with this pay data, above, which covers each establishment.
The first report is due May 10, 2023, and annually thereafter on the second Wednesday in May. The Department must be able to review and sort the categories of information provided. Employers must upload their data files using the California Pay Data Reporting Portal.
Employers who fail to file the report may expose themselves to civil penalties of $100.00 per employee for the first offense and $200.00 per employee for subsequent violations. This can amount to a $10,000.00 fine for an employer with 100 employees. The law authorizes the Department to recover the costs of compelling an employer to comply with the reporting requirements.
How Should Employers Prepare for the Requirement?
Employers are strongly encouraged to review compensation data, job postings, job descriptions, reporting requirements, and related policies and practices. Employers are also encouraged to train management and human resources on the new law and how to comply with the new requirements.