2023 Pay Transparency Law for California Employers With 15 or More Employees
Are You Ready for California's SB 1162 Pay Transparency Law?
Under this sweeping new pay transparency law, California employers must meet certain pay transparency standards. Employers must be in compliance with the new law by January 1, 2023.
SB 1162 also introduces a new, first-of-its-kind requirement for any California employers with 100 or more employees: mean and median pay reporting mandates. Under this new law, large companies must report additional data with their annual filings.
The law went into effect at the beginning of the year, which means your California company must be in compliance or you could face penalties or liability.
How can you make sure you stay in compliance? Talk to your legal team about adopting a regular reporting process if you haven’t already, and adjusting any processes you already have in place. The sooner you address this issue, the better.
Does California Have a Pay Transparency Law?
Until this year, California's only law that dealt with pay transparency was the state’s Equal Pay Act, which made it illegal for employers to stop their workers from discussing their wages.
California also has existing laws requiring large companies to file pay data with the state. If you have over 100 employees, it’s likely that you've already been required to file an annual Employer Information Report (EEO-1) with detailed employee pay data to the state.
However, SB 1162 is the first California law that specifically addresses pay transparency. Not only does the law introduce new pay transparency requirements for all California companies, but it also requires larger companies to submit additional employee pay records to the state, split up by identifying characteristics and job categories.
Your business attorney, compliance officer, or legal department should prepare your company for these changes before you end up on the wrong side of the law.
What Is CA SB 1162 and Who Does It Apply To?
SB 1162 is California’s first law dedicated to pay transparency. It affects millions of businesses across the state – even small businesses that didn’t previously have reporting requirements. If you have California employees, you should be aware of the following changes under the law.
For All California Companies:
You must provide a pay scale for any employee who currently works for you and requests this information about their job position.
You must keep job title and wage history records for each employee for as long as they’re employed and 3 years after they leave. The state’s Labor Commissioner may inspect these records to check for any patterns of wage discrepancy.
For California Companies With 15 or More Employees:
You must include pay scale information on any open job posting. This is defined as the salary or hourly wage range that an employer reasonably expects to pay for a position. In other words, it should generally reflect the market rate. Payscale information must be on the job posting itself – it cannot be linked to another page.
When recruiting through a third party, you must supply pay range information to the recruiter so that they can include it in the job posting.
What about remote employees? You must supply payscale information if the job opening could be filled by a person in California, either in person or remotely. That means the law could affect multi-state and out-of-state employers, too.
For California Companies With 100 or More Employees:
You must continue to submit employee pay reports to the California Civil Rights Department (CRD). This applies whether you submit EEO-1 reports to the EEOC or not.
You must include additional data categories in your reports to the state.
It's critical that all of your reporting is accurate and filed on time, because the California state Labor Commissioner may audit your records to check for any patterns of discrimination. For large companies with at least 100 employees, the reports you file with the state must include these additional data points under the new law:
The number of employees by race, ethnicity, and sex, split into 10 job categories: executive or senior-level officials and managers, first or mid-level officials and managers, professionals, technicians, sales workers, administrative support workers, craft workers, operatives, laborers and helpers, and service workers.
The number of employees by race, ethnicity, and sex whose annual earnings fall within each of the pay bands used by the Occupational Employment Statistics survey published by the U.S. Bureau of Labor Statistics.
The median and mean hourly rate for each job category and identity combination.
The total number of hours each employee works in each pay band annually.
Your North American Industry Classification System (NAICS) code.
Hopefully, you already have some kind of reporting structure already in place. You’ll have to make changes to your processes to meet these new requirements.
How to Stay in Compliance With SB 1162
What happens if you don’t comply with SB 1162? An employee could report you to the Labor Commissioner within one year of when they learn that a violation occurred. The employee could then either file a claim with the Commissioner or file a lawsuit in civil court if they suspect that you retaliated against them for asking about pay transparency.
A successful legal claim under SB 1162 could end up costing you. An employee could win reinstatement, back pay with interest, and possibly other damages. As a result, California employers should prepare for compliance as soon as possible. Your legal department can help you navigate these changes in several ways:
You conduct a pay equity audit of your workforce and make pay adjustments for any irregularities you discover – before they become an issue with the state.
You determine salary ranges that reflect the market. This way, you can avoid unintentional discrimination or unfairness based on reporting categories.
You make sure to include pay scale information in all job postings.
You review your recordkeeping policies to cover the data required under the new law.