Governor Newsom Signs Law Expanding Employer Pay Transparency and Pay Data Reporting Requirements
On February 17, 2022, the California legislature introduced Senate Bill (“SB”) 1162 to expand employer requirements regarding pay transparency and pay data reporting. CDF’s previous blog post analyzing the proposed bill is here. On September 27, 2022, Governor Gavin Newsom signed SB 1162 into law, requiring:
- Employers to submit pay data reports to the Department of Fair Employment and Housing (“DFEH”), including the median and mean hourly rate for employees categorized by each combination of race, ethnicity, and sex.
- Employers, with fifteen or more employees, to proactively provide pay ranges in job postings.
- All employers, upon request, shall provide current employees the pay scale for their position.
- All employers shall maintain records of job title and wage rate history for each employee for the duration of the employment plus three years after the end of employment.
The new obligations take effect on January 1, 2023 and are discussed in more detail below.
SB 1162 Amends Government Code Section 12999 To Expand California Employer Pay Data Reporting Requirements
Existing law requires California employers of 100 or more employees, with at least one employee in California, to report annual pay data reports to the DFEH. The statutory goal is to ensure employers self-evaluate pay disparities along gender, racial, and ethnic lines to encourage compliance with equal pay and anti-discrimination laws. This requirement parallels the federal Equal Employment Opportunity Commission's (EEOC) EEO-1 pay data reporting. Previously, employers subject to EEO-1 reporting could comply with Section 12999 by submitting their identical EEO-1 report. Instead, SB 1162 now requires separate and more detailed pay data reports (due on or before the second Wednesday of May annually).
SB 1162 adds to employers’ reporting obligations to the state, requesting the following information:
- The number of employees by race, ethnicity, and sex, during the snapshot period of October 1 to December 31 of the reporting year, for the following job categories: (1) executive or senior level officials and managers; (2) first or mid-level officials and managers; (3) professionals; (4) technicians; (5) sales workers; (6) administrative support workers; (7) craft workers; (8) operatives; (9) laborers and helpers; and (10) 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.
- The total number of hours worked by each employee plus paid time off (such as paid sick time, and holiday time).
- For employers with multiple establishments, the employer shall submit a report covering each establishment.
SB 1162 expands the pay data reporting obligation to include employees hired through a third-party that supplies workers to perform labor within the reporting employer's usual course of business. Employers that have 100 or more workers hired through labor contractors must also submit a separate pay data report to the DFEH detailing the same reporting requirements identified above, plus the ownership names of all labor contractors used to supply employees. This includes temporary workers and workers providing services through staffing agencies.
SB 1162 adds penalty provisions for the failure to file the required pay data report. Existing law under Government Code section 12999 does not include civil penalties. Now, upon request by the DFEH, a court may impose a civil penalty not to exceed $100 per employee. A subsequent failure penalty is not to exceed $200 per employee.
One version of SB 1162 required the DFEH to publish each private employer’s pay data report on a public website. The final version of SB 1162 states that the DFEH may publish aggregate reports based on the data received from employers, however, it is no longer a requirement to publicize these reports on a public website.
Finally, SB 1162 extends the filing deadline to the DFEH from March 31 of each calendar year to the second Wednesday of May every year.
SB 1162 Amends Labor Code Section 432.3 To Provide Greater Pay Transparency to Employees and Job Applicants
SB 1162 also expands the pay transparency law under Section 432.3 of the Labor Code. Existing law establishes that employers are required to provide job applicants with a pay scale upon reasonable request. SB 1162 requires employers of 15 or more employees to proactively provide pay scales for open positions in job postings, not just upon request. This includes job postings made by third parties. In that scenario, an employer must provide the third party with the pay scale information for the job posting. In addition, SB 1162 requires, upon request, employers to provide current employees the pay scale for the position in which the employee is currently employed.
Aggrieved employees may file complaints with the California Labor Commissioner and requires the agency to investigate complaints. Further, it permits the Labor Commissioner to order the employer to pay a civil penalty of no less than $100 per employee and no more than $10,000 per violation. The Labor Commissioner will determine the amount of the penalty based on the totality of the circumstances, including, but not limited to, whether the employee has previously violated Section 432.3.
Finally, new recordkeeping obligations are added to Section 432.3. An employer shall maintain records of job title and wage rate history for each employee for the duration of the employee’s employment and for a minimum of three years after termination. These records shall remain open for inspection by the Labor Commissioner.
California Employers Must Prepare for Compliance with SB 1162
As you can see, there are sweeping changes coming in 2023 to California employer pay data and pay transparency requirements. Qualified employers must prepare for their specific pay data reporting responsibilities. Employers who work with recruiters and third-party job posting websites should be prepared to supply pay scale information for job postings. Noncompliance with Government Code section 12999 and Labor Code section 432.3 present potentially costly penalties. As such, employers must follow the above-referenced changes to ensure compliance. If you have any questions about how to comply with California's changing pay data reporting and pay transparency requirements, please do not hesitate to contact CDF counsel.