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Employer Alert: California Adopts New Pay Transparency Law

Labor & Employment

How will this change your hiring and reporting practices?

 

California has joined Colorado, Washington, and New York with the adoption of its own, unique take on pay transparency legislation.

California Senate Bill 1162, which goes into effect on January 1, 2023, imposes significant disclosure and reporting requirements for employee pay data.

The new law requires employers with 15 or more employees to implement new practices in three key areas:

  1. Job Postings – As of January 1, all job postings must include the applicable pay scale. This requirement applies not just to the employer’s direct position listings, but also to positions posted by or through third parties, such as LinkedIn, Indeed.com, and the like.
  2. Disclosures to Employees – Upon request, employers must provide employees with the pay scale for the position they currently hold.
  3. Personnel Records – Employers must maintain records of each employee’s job title and wage rate history for three years after the end of the employment relationship, and make such records available for inspection by the Labor Commissioner.

New Pay Data Reporting Requirements

SB 1162 also modifies employer pay data reporting requirements. Under existing law, private employers in California with 100 or more employees must submit an annual report to the California Civil Rights Department (CRD) that includes the number of employees by race, ethnicity, and sex in specified job categories. They may comply by providing the CRD a copy of their annual Employer Information Report (EEO-1), a report that is required under federal law.

Beginning January 1, submitting the EEO-1 is no longer sufficient; rather, employers must prepare a unique pay data report that includes the median and mean hourly rate for each job category, including specific figures based on race, ethnicity, and sex. SB 1162 also changes the due date for all future reports from March 21 to the second Wednesday of May each year, beginning in 2023. Employers who fail to comply with the law could be fined $100 per employee.

What Should Employers Do Now?

While the purpose of the law may be to encourage employers to identify and remedy pay disparities between protected groups, increased government access to pay information may also foster more discrimination lawsuits. Employers should work with their employment counsel to identify and remedy any pay disparities that appear on the face of their employee data, and do so well before they are required to disclose information to job applicants and report it to the CRD.

JMBM’s Labor & Employment Practice

JMBM’s Labor and Employment attorneys counsel businesses and management on workplace issues, helping to establish policies that address problems and reduce job-related lawsuits. We act quickly to resolve claims and aggressively defend our clients in all federal and state courts, before the Department of Labor, the NLRB, and other federal, state and local agencies, as well as in private arbitration forums. We represent employers in collective bargaining negotiations and arbitration.

This update is provided to our clients, business associates and friends for informational purposes only. Legal advice should be based on your specific situation and provided by a qualified attorney.