It is official. California has joined Colorado, Washington and New York City in requiring job posting to include pay ranges. Today (September 27, 2022), Governor Newsom signed SB 1162 into law, requiring California employers with 15 or more employees to include the salary or hourly wage range of positions in job listings. SB 1162 also requires employers with 100 or more employees to provide additional detail in the annual pay data reports already mandated under California law.
An earlier version of the bill would have required large employers to post salary data broken out by gender, race and ethnicity online. But those requirements were stripped from the bill in August, after business groups opposed the measure on the basis that sharing such pay data publicly would lead to increased and costly litigation, which in turn would limit the employers’ ability to increase wages. Though large employers may breathe easier given this change, SB 1162 still imposes significant and new pay transparency and disclosure requirements on California employers.
Here is what California employers need to know now.
Pay data reporting: what is required now that SB 1162 is law
The existing requirements (before SB 1162 modifications)
California already requires private employers with 100 or more employees (counting employees located both inside and outside of California) who are required to file an annual Employer Information report (EEO-1) under federal law to submit a “pay data report” to the Civil Rights Department (CRD, formerly known as the DFEH) by March 31 each year for the prior calendar year (“reporting year”). (For more information, see our prior blogs here and here.)
- The report must include specified information, including the number of employees by race, ethnicity, and sex for 10 job categories, established by creating a “snapshot” that counts all individuals in each job category by race, ethnicity, and sex employed during a single pay period of the employer’s choice between October 1 and December 31 of the reporting year. The 10 job categories include 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.
- Employers also must report the number of employees by race, ethnicity, and sex whose annual earnings fall within each of the pay bands the US Bureau of Labor Statistics uses in the Occupational Employment Statistics survey (established by calculating the total earnings shown on the IRS Form W-2 for each employee in the “snapshot” for the entire reporting year; the total number of hours worked by each employee counted in each pay band during the reporting year; and the employer’s North American Industry Classification System (NAICS) code).
- An employer could (pre-SB 1162) comply with the pay data reporting obligation by submitting an EEO-1 report that contains the same or substantially similar pay information. Employers with multiple establishments must submit a report for each establishment and a consolidated report that includes all employees. All employers must provide the data in a format that allows CRD to search and sort the information using readily available software, and employers may, but are not required to, provide clarifying remarks concerning the information in the report.
- CRD must make the reports available to the Division of Labor Standards Enforcement (DLSE) upon request and maintain the data for at least 10 years. Both CRD and DLSE must keep the data confidential, except as necessary for administrative enforcement or through the normal rules of discovery in a civil action. CRD may seek an order requiring an employer to comply with these requirements and is entitled to recover the costs associated with seeking the order for compliance.
What changes now that SB 1162 is law
No EEO-1 report allowed
SB 1162 eliminates the option of submitting an EEO-1 report in lieu of a pay data report.
Consolidated reports not required
Employers with multiple establishments are no longer required to submit a consolidated report, and instead only need to submit a report covering each establishment.
Median and mean hourly rate required
The new law now requires the pay data report to include the median and mean hourly rate for each combination of race, ethnicity, and sex within each of the 10 job categories.
New deadline for submissions
The bill requires the submission of pay data reports on or before the second Wednesday of May 2023, and for each year thereafter on or before the second Wednesday of May (as opposed to the current March 31 annual deadline).
Employees hired through labor contractors now count
SB 1162 also requires a private employer that has 100 or more employees hired through a labor contractor (an individual or entity that supplies, either with or without a contract, a client employer with workers to perform labor within the client employer’s usual course of business) to submit a separate pay data report for those employees by the submission deadline.
Violations / penalties
The bill authorizes a court to impose a civil penalty not to exceed $100 per employee upon any employer who fails to file the required report, and not to exceed $200 per employee upon any employer for a subsequent failure to file the report.
Pay scale disclosure: what changes now that SB 1162 is law
Pay scale required in job postings
SB 1162 now requires an employer with 15 or more employees to include the pay scale (salary or hourly wage range) for a position in any job posting. SB 1162 also requires employers who engage third parties to announce, post, or publish (or otherwise make known) job postings to provide the third parties with the pay scale information, and requires the third parties to include the pay scale in job postings.
Pay scale disclosure to applicant and current employee
California law previously required employers to provide pay scale disclosures to applicants upon reasonable request. Now, SB 1162 requires employers to provide current employees with the pay scale for their positions upon request.
Under SB 1162, employers must maintain records of job titles and wage rate histories for each employee for a specified timeframe, with the records to be open to inspection by the Labor Commissioner. If an employer fails to keep the required records, the law creates a rebuttable presumption in favor of an employee’s claim.
Violations / penalties
SB 1162 requires the Labor Commissioner to investigate alleged violations of its requirements and authorizes the commissioner to order employers to pay civil penalties upon finding a violation. The bill also authorizes a person aggrieved by a violation to bring a civil action for injunctive and any other appropriate relief.
What should California employers do now?
California employers need to act quickly – SB 1162 requires posting of pay ranges in job listings as of January 1, 2023. And the revised pay data reports must be submitted by May 10, 2023.
As always, contact your Baker McKenzie employment attorney for help with this new law or any other employment needs.