e-Alert: California Wage Transparency Laws Become Effective January 1, 2023

Summary

Expansion of Pay Disclosure Requirements

Starting on January 1, 2023, both public and private employers with 15 or more employees must include a position’s salary or hourly wage range in any internal or external job postings. (These requirements also apply to jobs posted by a third-party agency.) We will refer to this hereto as a “pay band.”

Under the existing California law, employers have been required to provide a position’s pay band to an applicant after they completed the initial interview.  Starting in January, covered employers must now provide current employees with the pay band for the position they currently hold upon request.

The law does not expressly state the definition of a pay scale; however, the data should include the salary or hourly range that the employer reasonably expects to pay for the role. It is unclear at this time whether bonuses, commissions, or other variable benefits such as PTO or health benefits should be included. Employers should monitor additional guidance from the Department of Labor Standards for such clarification.

Notably missing from the legislation is the application for remote workers. SB-1162 does not restrict the law to businesses solely based in California, so it remains unclear whether it applies to organizations that operate outside of the state but have remote employees in California, or post roles that could be performed remotely in California.

Covered employers must maintain a record of each employee’s title and wage history during the course of their employment period and for three years after separation.

Expansion of Annual Pay Data Reporting

Similar to federal pay data reporting requirements, in September 2020, California implemented the California Pay Data Reporting legislation in an effort to reduce gender and racial pay gaps. Beginning on May 10, 2023, SB-1162 expands CA Pay Data Report requirements to include:

• The number of employees by race, ethnicity, and gender within each of the 10 specific job categories;
• Within each of the 10 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 that includes the above pay data for each establishment

Non-Compliance Penalties

SB-1162 also establishes a civil penalty of up to $10,000 per violation of its pay scale disclosure and job posting requirements. However, there is no penalty for a first violation of the job posting requirement if the employer can show that all job postings for open positions have been updated to include the pay scale.

The law also allows for the Civil Rights Department to coordinate with the Employment Development Department to obtain a list of businesses with 100 or more employees to ensure compliance with the report filing requirements. This document will be a public record.

CA employers should monitor the California Department of Industrial Relations for additional guidance and information as it becomes available.

Employer Next Steps