California employers with 15 or more employees will need to include salary ranges on job postings starting January 1, 2023. Governor Gavin Newsom signed California’s Pay Transparency for Pay Equity Act (SB 1162) on Tuesday, September 27, 2022, adding California to the growing list of states and cities passing pay transparency laws.
New Pay Transparency Requirements under SB 1162
The new law, SB 1162, requires an employer with 15 or more employees to include in all job postings the salary or hourly wage range that the employer reasonably expects to pay for the position. Previously, employers were only required to provide an applicant with a pay range upon reasonable request. SB 1162 also requires covered employers to provide employees with the pay scale for their current positions upon request. Additionally, the bill requires employers to maintain job title and compensation records for each employee for the duration of their employment and for three years following their termination of employment. Furthermore, if a covered employer engages a third party to post, publish, or advertise a job posting, the employer must provide the pay scale to the third party to include in the job posting. The Labor Commissioner may investigate complaints alleging violations of these requirements and upon finding a violation, could order a covered employer to pay a civil penalty of between $100 to $10,000 per violation. The law also provides a private right of action for an individual to seek injunctive and other relief.
Additionally, under the new California law, each year, on or before the second Wednesday of May, any private employer with 100 or more employees must submit an annual pay data report to the California Civil Rights Department that discloses the median and mean hourly rates, within each listed job category, by race, ethnicity, and sex. Furthermore, any private employer with 100 or more workers hired through labor contractors (such as temporary staffing agencies) must submit a separate pay data report for these workers. Failure to file the required reports could result in penalties of $100 per employee for an initial violation and up to $200 per employee for any subsequent violation.
A few questions about the provisions of the law remain. For example, the law is silent as to whether the pay disclosure requirements relate to job postings for California employers with remote workers outside of California or employers based outside of California who are hiring remote workers based in California, or whether the law applies only to employers with 15 or more California-based employees. Follow up guidance may address these, and other questions, that arise. Colorado’s pay transparency law, the first to require compensation disclosure in job postings, may be instructive in predicting the answers to some of these questions. For instance, the Colorado law requires any employer (with at least one employee in Colorado) to include pay disclosure in any job posting for a position that will or may be performed in Colorado (including remote positions).
California Joins Growing List of Jurisdictions with Similar Laws
In signing this legislation, California follows other jurisdictions that have recently passed similar pay transparency laws including Colorado, Washington, and New York City. The New York legislature passed a statewide pay transparency law in June which is awaiting the governor’s signature. If signed, the New York pay transparency law could also take effect next year (i.e., 270 days after signing). Other jurisdictions have passed pay transparency laws, but do not require compensation disclosure in job postings. For example, Connecticut, Nevada, and Rhode Island have passed laws requiring pay disclosure during the hiring process, and Connecticut and Rhode Island, along with Maryland, also require pay disclosure upon an applicant’s request.
Next Steps for Employers
To prepare for the new disclosure requirements, California employers should review compensation data, job postings, job descriptions, reporting requirements, and related policies and practices. Employers should also consider training management and human resources personnel on how to comply with the new requirements and conducting a pay equity audit to identify and remedy any existing pay disparities.
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