Governor Newsom signed into law the much anticipated SB 1162, which expands California's pay transparency and data reporting requirements.
Pay Scale Transparency Obligations
Already, California employers are required to provide the pay scale for a position to any applicant applying for employment, upon request. That provision was limited to requests made after an applicant completed an initial interview with the employer. That limitation was removed by the new law, which means all employers must provide an applicant with a pay scale upon request.
That's just the tip of the iceberg. The new law requires much more:
- Employers must provide employees with the pay scale for their current position, upon request
- Employers with 15 or more employees (or their agents) must include the pay scale for a position in ANY job posting
The law is not limited to businesses operating in California, but it is unclear how - or if - it will apply to nationwide postings for jobs that could be performed remotely from California.
What Are the Penalties for Noncompliance?
Noncompliant companies may face a civil fine of no less than $100 and up to $10,000 per violation of the pay scale and posting requirements. The fine amount will be determined by the Labor Commissioner based on "the totality of the circumstances," including whether the company has previous violations. No fine will be assessed for a first time violation if the company demonstrates that all job postings for open positions were updated to include the pay scale.
Pay Data Reporting Obligations
All private employers with 100 or more employees must submit a pay data report to the state on or before the second Wednesday of May, beginning in 2023. This requirement was previously limited to private employers required to file an EE0-1 report. It now applies to all private employers with 100 or more employees.
The law also now requires all private employers with 100 or more employees hired through "labor contractors" to submit a separate pay data report to the state on or before the second Wednesday of May, beginning in 2023.
To assist the state in effectuating the law, private employers are now required to disclose on the pay data report the ownership names of all labor contractors used to supply employees; and labor contractors are required to supply all necessary pay data to the private employer.
Employers with multiple establishments are required to submit a report covering each establishment.
Civil penalties may be imposed on employers who fail to report, and labor contractors may share in those penalties if the failure to report was at least in part due to the labor contractor not supply the necessary pay data.
Is Your Company a "Labor Contractor"
The law defines labor contractors to include: "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."
What If Your Company Only Has One Employee in California?
The reporting obligations apply to any company that has 100 or more employees with at least one employee working in California.
This is because the law defines "employee" broadly as "an individual on an employer's payroll, including a part-time individual, and for whom the employer is required to withhold federal social security taxes from that individual's wages."
There is not yet any agency guidance regarding the new law (as it was just signed into law), but California's Department of Fair Employment and Housing (the agency tasked with collecting the pay data) has provided fairly extensive guidance on pay data reporting in the past, including:
- Reporting requirements apply to employers with 100 or more employees overall, whether the employees are located inside or outside of California.
- An employer has 100 or more employees by either:
- Employing 100 or more employees during the Snapshot Period chosen by the employer.
- Regularly employing 100 or more employees during the Reporting Year.
- Only California employees must be included in the pay report, including those employees who telework from a residence outside of California but are assigned to an establishment in California.
- Temporary employees on payroll also count toward the 100-employee threshold.
What Information Must Be Included in the Pay Data Report?
The law requires the pay data reports to include:
- The number of employees by race, ethnicity, and sex in each of the following job categories:
- Executive or senior level officials and managers
- First or mid-level officials and managers
- Sales workers
- Administrative support workers
- Craft workers
- Laborers and helpers
- Service workers
- The number of employees by race, ethnicity, and sex, whose annual earnings fall within each of the pay bands used by the United States Bureau of Labor Statistics in the Occupational Employment Statistics survey
- The median and mean hourly rate for each combination of race, ethnicity, and sex within each job category
The data to be used may be a "snapshot" that counts the data of all individuals employed in each category by race, ethnicity, and sex, employed during a single pay period of the employer's choice between October 1 and December 31 of the reporting year.
Bob Sanders is an attorney at Taylor English Duma LLP. He has helped companies across the country make confident, business-minded employment decisions. He routinely counsels employers on best practices to avoid risk when handling employee discipline and discharge, leave and accommodation, discrimination and harassment, wage and hour, worker safety, and other issues. He can be reached at email@example.com.
These materials are informational in nature, are not legal advice, and do not create an attorney-client relationship.