Business Law

Effective January 1, 2023, New Expanded Requirements for Pay Data Reporting and Pay Transparency

Effective January 1, 2023, most California employers will now need to comply with expanded rules for disclosing pay range information to job applicants and employees and new recordkeeping and reporting requirements.  Senate Bill 1162 (“SB 1162”) was signed into law in September 2022, with the aim of improving pay equity, and carries with it some potentially stringent penalties for employers who fail to comply. 

Pay Transparency

Unlike California’s prior law, where employers were only required to provide applicants with the pay scale for a position upon “reasonable request,” now, employers with 15 or more employees must affirmatively include the pay scale for a position in any job posting. A “pay scale” is defined as the salary or hourly wage range that the employer “reasonably expects” to pay for the position. This obligation extends to any third party the employer engages to announce, post, publish or otherwise make known a job posting. 

SB 1162 also expands existing law to require employers to provide employees with the pay scale for the position in which the employee is currently employed, upon reasonable request.

Pay Data Reporting Requirements

SB 1162 also requires all private employers of 100 or more employees to submit specific pay data covering the prior calendar year, or “Reporting Year,” to the California Civil Rights Department (“CRD”) by the second Wednesday in May of each year (so pay data for 2022 would be due May 10, 2023 for this year).  The annual report must include, among other information, such information as the number of employees by race, ethnicity and sex for specified job categories as well as the median and mean hourly rate by race, ethnicity and sex for each job category. 

SB 1162 also requires employers with 100 or more employees hired through labor contractors to submit a separate pay data report to the CRD covering the employees hired through labor contractors in the prior calendar year. A labor contractor must supply all necessary pay data to the employer for the report, and the employer must also disclose in the pay data report the ownership of all labor contractors used to supply employees.

Potential for Significant Penalties

If an employer violates the pay transparency requirements (including specified record retention requirements), the employer could face civil penalties between $100 and $10,000 per violation of the pay transparency requirements.  With respect violations of the pay data reporting requirements, the CRD may request a civil penalty for the failure to file the required report of up to $100 per employee for the first violation and up to $200 per employee for each subsequent violation. 

This e-Bulletin was prepared by Andrew Hirsch of Stone Canyon Industries Holdings LLC. The author is Vice-Chair, Publications, of the Corporations Committee of the Business Law Section of the California Lawyers Association. The views expressed herein are those of the author and do not necessarily reflect the views of Stone Canyon Industries Holdings LLC.

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