Are you Prepared to Comply with California’s Pay Transparency for Pay Equity Act?
On September 27, 2022, Governor Gavin Newson signed into law the “Pay Transparency for Pay Equity Act” (SB 1162), which imposes new disclosure and reporting requirements on California employers. The law will go into effect January 1, 2023 and is another significant move by California to ensure pay equity and transparency in the workplace.
Below we summarize the key provisions of this new law:
- Pay Scale Disclosure Requirements:
- Employers with 15 or more employees must include the pay scale for the position in any job posting and direct any third party they use to post or advertise the position to do the same.
- All employers, upon request by an applicant or employee, must provide pay scales not only to applicants for the positions to which they are applying (a requirement under prior law) but also to current employees for the positions in which they are employed. “Pay scale” is defined as the salary or hourly wage range that the employer reasonably expects to pay for the position.
- Pay Data Reporting Requirements
- Under previous law, employers with 100 or more employees were required to submit an annual Pay Data Report to the Civil Rights Department (“CRD,” previously the Department of Fair Employment & Housing) that identifies by race, ethnicity, and sex, the number of employees in specified job categories (i.e., 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, service workers). Under the previous law, employers could satisfy this requirement by filing an annual EEO-1 Report. Under the new law, employers with 100 or more employees (including full-time, part-time, and temporary employees) must:
- Separately submit a Pay Data Report to the CRD, even if they are already providing the same information in an EEO-1 Report; In the Pay Data Report, provide the median and mean hourly rate for each race, ethnicity, and sex in each job category; and
- Submit the Pay Data Report covering the prior year on or before the second Wednesday of May 2023, and each subsequent year on or before the second Wednesday of May (instead of March under prior law).
- Recordkeeping Requirements
- Employers must maintain records of the job title and wage rate history for each employee during their employment plus three years after their employment ends. The Labor Commissioner may use these records to determine if there is a pattern of wage discrepancy.
- Employers who fail to file a required Pay Data Report or who fail to make the required disclosures may be subject to steep civil penalties imposed by the Labor Commissioner:
- Employers who fail to submit the required Pay Data Report may be subject to a civil penalty of $100 per employee for the first violation, and $200 per employee for any subsequent violation.
- Employees who allege that employers have failed to make the required pay scale disclosures or have not maintained proper records of job title and wage rate history may file a written complaint with the Labor Commissioner and may also file a civil action for injunctive or other relief as the court deems appropriate. If the Labor Commissioner agrees with the employee, the employer may be subject to a civil penalty of $100 to $10,000 per violation. The Labor Commissioner will determine the penalty amount based on several factors, including whether the employer has previously violated this section.
Key Takeaways for Employers:
Employers are encouraged to begin preparing to comply with this new law and to ensure all third-party job recruitment agencies with whom they work are also preparing to comply. Employers should also review their recordkeeping policies and procedures to ensure they are maintaining a record of each employee’s job title and wage rate history for the required time period.
The employment attorneys at Lagasse Branch Bell + Kinkead are happy to answer your questions regarding SB 1162 and to ensure your company is prepared to comply. We can draft applicable policies and procedures, help create pay scales, and assist your company in conducting audits to ensure pay equality.