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Ready, Set, Go – Pay Data Reporting and Pay Transparency Effective in California on January 1, 2023

And just like that, Governor Gavin Newsom signed Senate Bill 1162 (“SB 1162”) into law on September 27, 2022. Under this groundbreaking shift, which goes into effect on January 1, 2023, California employers with 15 or more employees will be required to include pay ranges in job postings, and those with 100 or more employees or contractors will have to report median and mean hourly pay rates by job category and each combination of race, ethnicity and sex.

Proponents of the bill have long felt that SB 1162 will help equalize the playing field for employees. Opponents worry that enactment of the bill, by grouping together workers in very broad categories can lead to chaos, confusion, complication and – of course – additional civil litigation and administrative claims over wage disparity which will be brought to light with the required reporting (including the requirement to submit pay data by race, sex and ethnicity).  

What Are Employer Obligations Under SB 1162?

  • Pay Data Reporting

SB 1162 makes the following significant changes to pay data reporting requirements under Government Code Section 12999. Employers with 100 or more employees must report the median and mean hourly rate by each combination of race, ethnicity and sex, within a very broad range of job categories listed in Government Code Section 12999 including executive or senior level officials and managers, professionals, technicians, sales workers, and so on. These reports are now due annually on the second Wednesday of May, with the first report of its kind now becoming due on May 10, 2023 (requiring calendar year 2022 pay data). Indeed, a private employer that has 100 or more employees hired through labor contractors within the prior calendar year must submit a separate pay data report to the department covering the employees hired through labor contractors in the prior calendar year.  Employers who fail to file reports may be subject to penalties up to $100 per employee and higher for repeat offenders.

  • Pay Scale Disclosures

Current law in California requires employers to provide candidates for employment the pay scale for the position the candidate is seeking –but only upon request. As of January 1, 2023, employers with 15 or more employees must include a pay scale in all job postings. Employers with 15 of more workers are obligated to provide pay scale information to third parties who post jobs on the employer’s behalf.  Penalties are applicable for employer violations. Additionally, all employers, regardless of size, must provide a pay scale for a current employee’s position at the employee’s request.  

Recommended Practices for Employers

First, set a stern reminder that SB 1162’s pay scale disclosure and pay data reporting requirements are effective January 1, 2023, so planning ahead to be prepared for this onerous deadline is key.  The updated pay data pay reports, including mean and median hourly rates, are due starting May 10, 2023. We recommend preparing for these new requirements as soon as practicable given the work it will take to be compliant.

Next, it is now more crucial than ever that all employers, regardless of size, stay up to date with pay transparency laws and its derivative requirements. Employers should consider proactive risk mitigation assessments, such as policy and pay audits, review of hiring practices, promotion reviews, and updating employee handbooks yearly to address all changes to the law and the employer’s policies. To the extent that requests or other complaints related to these issues arise, administrative or otherwise, it is important to exercise care in preparing a thoughtful response (and consider seeking counsel to make sure you are on the right track with your decisions and documentation). Last but not least, it is always recommended to conduct training sessions with your employees, especially Human Resources staff, on SB 1162.  If you have questions on SB 1162, we recommend seeking counsel.

Your attorneys at Gordon Rees Scully Mansukhani are available to discuss and help formulate and finalize your organization’s plan for compliance and answer any questions regarding implementation.

Employment Law

Varouj Arabian

Employment Law