Effective January 1, 2023, the California legislature has expanded both pay transparency and employee data reporting requirements.  In this post, we will address the major points of these new requirements. 

Pay Transparency in 2018

You may recall that in January 2018, a law was enacted (Labor Code section 432.3) prohibiting employers from seeking salary history from job applicants.  Salary history includes compensation and benefits.  An employer may ask an applicant about salary expectations, and if an applicant requests, an employer must provide the pay scale for the position.  Applicants may voluntarily and without prompting disclose their own salary history; however, an employer is prohibited from relying on prior salary to justify a pay difference between employees of the opposite sex, or different race or ethnicity, who are performing substantially similar work because that violates the Equal Pay Act.

Expanded Pay Transparency

In addition to the above, effective January 1, 2023, SB 1162 amends Labor Code 432.3 to state that private or public sector employers with 15 or more employees will be required to post the pay scale for an open position in their job postings (and must provide that information to third parties who post those jobs).  “Pay scale” is defined as the salary or hourly wage range that the employer reasonably expects to pay for the position; however, it does not include bonuses, commissions (unless position is based on commissions), tips, or other benefits. 

To clarify the number of employees, if an employer has a total of 15 employees anywhere (including out of state and multiple facilities), and only one employee in California, the above law would apply.

In terms of remote workers, the Labor Commissioner has clarified that the pay scale must be included in the job posting if the position may ever be filled in California, either in person or remotely.

Further, SB 1162 also requires all employers to provide current employees with the pay scale for the position in which the employee is currently employed, if the employee requests it.

For more information, please see the updated Frequently Asked Questions here:

https://www.dir.ca.gov/dlse/california_equal_pay_act.htm

Expanded Reporting

Under existing law, private employers with 100 or more employees are required to file an annual report with the state detailing the number of their employees by race, ethnicity, and gender in each of 10 job categories.

Effective January 1, 2023, SB 1162 has an added requirement for employers to file an annual Payroll Employee Report.  Employers must calculate and report the mean and median hourly rate of pay for its employees and/or labor contractor employees (i.e., temp agency employees) by establishment, job category, race/ethnicity, and sex.  Multi-establishment employers may submit a single Payroll Employee Report and/or a single Labor Contractor Report, depending on which of these reports the employer is required to file.  Reports are to be filed with the California Civil Rights Department (formerly the Department of Fair Employment and Housing).

The deadline for submitting the first reports for 2023 will be May 10.  The deadline for submitting reports in subsequent years will be the second Wednesday of each May.

For more information, please see the updated Frequently Asked Questions here:

https://calcivilrights.ca.gov/paydatareporting/faqs/

Checklist Items and Best Practices

Depending on whether you have some or all of these processes in place, here are some action steps and best practices:

• Create pay ranges to align with specific job descriptions.
• Pay ranges should include requirements and parameters for each range.
• Be prepared for employees to inquire about pay ranges. 
• Maintain records of job titles and wage rate history for each employee for three years after end of employment.
• Recommended language for job postings:

“In accordance with California law, the expected salary range for this California position is between $_____ and $_____. The actual compensation will be determined based on experience and other factors permitted by law.”

• If you use a third-party recruiter or agency, be sure those parties are following pay transparency job posting requirements.
• Reach out to EBHR at [email protected] for compliance assistance.

Information contained in this post is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.