Legislation signed by Governor Gavin Newsom last week requires employers to make pay scales available to job applicants and employees and expands California’s pay data reporting requirements.
Now that SB 1162 has been signed, employers should review the new requirements and begin preparing to comply with the changes for 2023.
Pay Scale Disclosures
Currently, California employers are prohibited from asking job applicants about their salary history during the hiring process. Current law also requires employers to provide job applicants with pay scale information upon the job applicant’s request.
Beginning January 1, 2023, however, employers will have new pay scale obligations — and not just to job applicants.
First, in addition to job applicants being able to request a pay scale for the position they’re applying for, employers must provide, upon request, a pay scale to an employee for the position that they are currently working. The law defines pay scale as the salary or hourly wage range that the employer reasonably expects to pay for the position.
In addition, employers with 15 or more employees must include the pay scale information for a position in any job posting. If an employer uses a third party to “announce, post, publish or otherwise make known a job posting,” the employer must provide the pay scale to the third party, who must include it in the job posting.
Finally, employers must maintain records of job titles and wage rate histories for each employee for the duration of their employment plus three years after the end of employment for the California Labor Commissioner to determine if there are any wage discrepancies. The Labor Commissioner must be able to inspect the records. If an employer fails to keep records as required, the law creates a rebuttable presumption in favor of an employee’s claim.
An individual that claims to be aggrieved by a violation of the law can file a claim with the Labor Commissioner or a civil action, which could result in penalties, injunctive relief or any other relief a court deems appropriate.
Civil penalties range from $100 to $10,000. However, the Labor Commissioner will not assess a penalty for the first violation of the law if the employer demonstrates that all job postings for open positions have been updated to include the pay scale as required.
Pay Data Reporting
SB 1162 also revises and expands California’s pay data reporting requirements, including adding a new data requirement and requiring separate pay data reports for employers with 100 or more employees hired through labor contractors.
Current law requires employers with 100 or more employees to submit pay data reports to the California Civil Rights Department (formerly the California Department of Fair Employment and Housing) that contain, based on their chosen snap-shot period, the following:
• The number of employees by race, ethnicity and sex in 10 different job title categories;
• The number of employees by race, ethnicity and sex, 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;
• Total number of hours worked by each employee counted in each band during the reporting year; and
• North American Industry Classification System (NAICS) code.
Employers must now report one more category in their pay data report — in addition to the above, employers must provide, “within each job category, for each combination of race, ethnicity, and sex, the median and mean hourly rate.”
Notably, the law adds the requirement for private employers that have “100 or more employees hired through labor contractors within the prior calendar year” to submit a separate pay data report covering the employees hired through labor contractors. The report must include the ownership names of all labor contractors used to supply employees.
The new law also specifies that for employers with multiple establishments, the employer must submit a report covering each establishment.
Lastly, the law changed the deadline for the reports to the second Wednesday of May annually. The first report under the new requirements will be due May 10, 2023.