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California Legislature Passes Wage Disclosure Law & Expands Its Pay Data Reporting Law

On September 27, 2022, California enacted a law (S.B. 1162) which will add California to the growing list of jurisdictions that require pay ranges to be included in job postings. The law also significantly expands the state’s pay data reporting requirements for large employers. The law will take effect January 1, 2023.

Wage Disclosure Requirements

The wage disclosure portion of the law will require an employer, upon request, to provide to an employee the pay scale for the position in which the employee is currently employed, in addition to, requiring an employer with 15 or more employees to include the pay scale for a position in any job posting.

The law will also require an employer with 15 or more employees that engages a third-party to announce, post or publish job ads on their behalf to ensure the pay scale is included in any job postings published by the third-party.

The law also contains recordkeeping obligations which require employers to maintain records of a job title and wage rate history for each employee for the duration of the employment plus three years after the end of the employment in order for the Labor Commissioner to determine if there is a pattern of wage discrepancy.

Pay Reporting Requirements

The law also expands existing pay reporting requirements. Below are differences on the current pay data reporting law and the updated law which takes effect on January 1:

Existing LawS.B. 1162; effective Jan. 1, 2023
Applies to employers with 100 or more employees, who are currently required to file an EEO-1 report under federal lawWill apply to all private employers that have 100 or more employees
Due date of March 31 each yearDue date would be on or before the second Wednesday of May 2023, and for each year thereafter
Report must include the number of employees by race, ethnicity, and sex in specified job categories, or submit EEO-1 in lieu of requested dataReport must include the median and mean hourly rate for each combination of race, ethnicity, and sex within each job category. Removal of the option to submit an EEO-1 in lieu of a pay data report
Multi establishment employers must submit a report for each establishment and a consolidated report that includes all employeesMultiple establishment employers will need to submit a separate pay data report for each establishment; no longer required to also submit a consolidated report
 Employers with 100 or more employees hired through labor contractors in the prior calendar year will have to file a separate pay data report for those workers

Penalties for Non-Compliance

This law would permit a court to impose a civil penalty not to exceed one hundred dollars ($100) per employee upon any employer who fails to file the required report and not to exceed two hundred dollars ($200) per employee upon any employer for a subsequent failure to file the required report.

Next Steps for Employers

Employers should anticipate that employees will start asking about their own pay ranges and that they will see job ads and react to the pay scales provided there as well. In addition, wage discussions between coworkers may increase. Employers must be aware that federal and state law provides protections for employees in this regard, so employers should not attempt to prohibit, prevent or take adverse action against employees for discussing wages.

Covered employers who currently do not have established wages ranges should begin to develop them prior the effective date. Best practice is to review both external and internal recruiting practices, specifically, as it relates to posting of open positions and examine compensation practices to ensure that wage ranges for open positions are in line with industry and market data. Such reviews assist with market competitiveness and employee retention. In addition, employers should also review and update their job descriptions; for those who do not have job descriptions, consideration should be given to development of a job description for each position. Employers who do not have 15 or more employees, should also ensure that they have established wage ranges as an employee may request this information at any time.

Employers should also be prepared to explain why employees with the same job title or job description receive different compensation using the allowable reasons (i.e., seniority, merit, education, training, experience, or quantity or quality of production) for pay differentials. Employers may want to consider doing a pay equity audit to determine if any pay disparities exist that are not attributable to bona fide factors.

Due to the ever-increasing patchwork of state and local laws surrounding pay transparency and wage disclosures it is also recommended that employers consult with their legal counsel on best practices for compliance.

HR Works Can Help

HR Works offers Compensation & Pay Equity solutions that help employers stay compliant and ensure fair pay practices within their organization. Contact us to learn more about how we can assist you with meeting California’s wage disclosure requirements and reporting obligations.

HR Works, Inc., headquartered at 200 WillowBrook Office Park in Fairport (Rochester), New York, with an office in East Syracuse, is a human resource management outsourcing and consulting firm serving clients throughout the United States. HR Works provides scalable strategic human resource management and consulting services, including: affirmative action programs; benefits administration outsourcing; HRIS self-service technology; full-time, part-time and interim on-site HR managers; HR audits; legally reviewed employee handbooks and supervisor manuals; talent management and recruiting services; and training of managers and HR professionals.