California’s New Pay Transparency Law

Starting January 1, 2023, California’s State Bill 1162 will require employers with 15 or more employees to include pay ranges in job postings, following a national trend aimed toward addressing gender and race pay disparities. In addition, this law will add new pay data reporting requirements for larger employers with 100 or more employees. Here is what California employers need to know:

Pay Transparency

This law requires employers with 15 or more employees to include the hourly or annual salary pay range for a position in any job posting, including listings on third-party platforms. Employers with less than 15 employees will need to provide the pay scale to applicants upon “reasonable request.” For current employees, employers must provide the range “upon request.”

Simply posting a number acting as a floor or ceiling is non-compliant; the range must include a minimum and maximum number. For example, instead of listing “up to $60,000 per year” or “starting at $60,000 per year,” employers should list “$60,000 to $80,000 per year.” The same range applies to the disclosure of hourly wages.

California joins Colorado, Washington, New York, and New York City in implementing pay transparency requirements, benefitting employees across the country by requiring employers to be more transparent concerning wages. Other jurisdictions require employers to provide pay ranges upon request, and numerous states have pending pay transparency legislation in the works.

There is currently no guidance regarding whether fully out-of-state employers will be subject to the new California pay transparency requirements if they post advertisements for positions someone in California could fill. This is particularly relevant for remote jobs that could be filled by an employee living anywhere.

However, employers should be cautious with any attempts to circumvent this new law by excluding Californians from applying for the posted position. Multiple jurisdictions with pre-existing pay transparency laws have stated that this exclusion could constitute a violation.

Employers must additionally maintain records of job title and wage history for each employee for the duration of employment and three years after the end of employment so that the state’s Labor Commissioner, who is authorized to inspect these records, can determine if there is a pattern of wage discrepancies, if necessary.

Pay Reporting

In addition to the pay transparency requirements, California’s new law compels employers with 100 or more employees to submit a report of pay scale data beginning May 10, 2023, and every second Wednesday of May annually thereafter. Specifically, the report must include the number of employees by race, ethnicity, and sex in 10 job categories. This includes:

• Executive- or senior-level officials and managers • First- or mid-level officials and managers • Professionals • Technicians • Sales workers • Administrative support workers • Craftworkers • Operatives • Laborers and helpers • Service workers

The state will then publish these annual pay reports for the public.

Penalties

For employers that do not comply with the pay transparency requirements, the California Labor Commissioner is authorized to order civil penalties ranging from $100 to $10,000. The Commissioner will look at the violation under the totality of the circumstances, considering whether it is the employer’s first violation and whether the employer acts quickly to correct it.

Additionally, courts may impose civil penalties on employers who do not comply with the new pay data reporting requirements. These penalties are not to exceed $100 per employee upon any employer who fails to file the required report and penalties not to exceed $200 per employee upon any employer for a subsequent failure to file the required report. The more employees an employer has, the more penalties an employer will owe if they do not comply with the pay data reporting requirement.

What Should Employers Do?

First, keep meticulous records of employee pay and job descriptions. Then, be prepared for the reporting requirements ahead of the May deadline.

Second, audit current job postings to ensure pay ranges are included by January 1, 2023.

Third, considering the national trends, it may be beneficial for employers – particularly large employers – to create a uniform standard providing transparency on job postings, regardless of the jurisdiction. Although this may give employers less leverage when negotiating pay, it ensures compliance with pay transparency laws across the country. It may additionally draw more applicants to the positions, as applicants are more likely to apply to positions with pay ranges than ones without, giving employers a larger pool of applicants.