By Geraldine Villa, Attorney
Noland, Hamerly Etienne & Hoss
As Published in the Salinas Valley Business Journal, December 2022
To combat wage discrepancies in California, Governor Newsom signed Senate Bill 1162 (“SB 1162”) requiring employers with 15 or more employees to include pay scale information in job ads, and those with 100 or more employees to follow new pay data reporting requirements.
Pay Transparency Requirements
SB 1162 will have an impact on almost all employers. Effective January 1, 2023, it requires that any employer with 15 or more employees include the pay scale for a position in any job posting. If the employer is using a third party for job postings, the employer must provide the third party with the pay scale for the position, and the third party must include the pay scale in the job posting. “Pay scale” is defined broadly as the salary or hourly wage range that the employer reasonably expects to pay for the position.
Furthermore, there is an existing requirement that an employer provide a job applicant, upon reasonable request, with the pay scale for the position for which the applicant is applying. Under SB 1162, upon request, employers must also provide an existing employee with the pay scale for the employee’s currently held position.
SB 1162 also imposes new record retention requirements on employers. Employers must maintain records of a job title and wage rate history for each employee for the duration of the employment plus an additional three years after employment ends. The records must be available for inspection by the Labor Commissioner, who can determine if there is a pattern of wage discrepancy. Any complaints regarding these requirements must be filed with the Labor Commissioner within one year of the person learning of the alleged violation.
The Labor Commissioner may order an employer that has violated the pay transparency requirements to pay a civil penalty of between one hundred dollars ($100) and ten thousand dollars ($10,000) per violation. However, there will be no penalty for first time violations if the employer can demonstrate that all job postings for open positions have been updated to include the pay scale.
Pay Data Reporting Requirements
Prior to SB 1162, private employers with 100 or more employees that were required to file an annual federal EEO-1 report had to submit either a California pay data report or the EEO-1 with the same or similar pay data information covering the prior calendar year to the California Civil Rights Department (“CRD”), formerly known as the Department of Fair Employment and Housing, by March 31 of each year.
SB 1162 now requires all private employers with 100 or more employees to submit an annual pay report to the CRD regardless of whether they are required to submit an EEO-1 report. The deadline for employers to submit the report to the CRD has been amended to the second Wednesday of May each year, meaning that for 2023, the deadline is May 10, 2023.
SB 1162 also expands the data that must be reported. Prior to SB 1162, the pay data report had to include the number of employees by race, ethnicity and sex in various specified job categories ranging from executive or senior level managers to service workers. Beginning in 2023, employers must include the median and mean hourly rate within each job category for each combination of race, ethnicity, and sex.
Most significantly, SB 1162 requires a private employer that has 100 or more employees hired through labor contractors within the prior calendar year to submit a separate pay data report to the CRD for those employees by the second Wednesday of May of each year. The employer must disclose on the pay data report the ownership names of all labor contractors used to supply employees. For the employer to comply with this requirement, the labor contractor, defined as “an individual or entity that supplies, either with or without a contract, a client employer with workers to perform labor within the client employer’s usual course of business,” must supply all necessary pay data to the employer
For employers with multiple establishments, SB 1162 continues to require a report for each establishment but eliminates the requirement that the employer submit a consolidated report that includes all employees.
Significantly, for employers who fail to file the required reports, SB 1162 allows a court to impose a civil penalty of up to $100 per employee and a civil penalty of up to $200 per employee for any subsequent violation. If the failure to submit a complete and accurate report is due to a labor contractor’s failure to provide pay data, the court may apportion some of the penalties to the labor contractor.
Employer To-Do List
Beginning January 1, 2023, employers should ensure any job postings include the pay scale and should establish record retention policies. Employers with 100 or more employees should also prepare for reporting requirements and deadlines. Most importantly, employers should address any wage discrepancies that may come to light.
This article is intended to address topics of general interest and should not be construed as legal advice. © 2022 Noland, Hamerly, Etienne & Hoss