New Pay Disclosure Bill: What California Employers Need To Know

Update (9/28/22):

Governor Newsom has signed SB 1162 into law, bringing increased pay transparency and pay reporting requirements to California employers. This new law will require:

• Employers with 15+ employees to disclose the pay range in job postings, and require employers to provide the pay range upon request to current employees
• Employers with 100+ employees to report “Within each job category, for each combination of race, ethnicity, and sex, the median and mean hourly rate”
• Employers that have 100+ employers that were hired through labor contractors to submit a separate pay data report that also discloses the ownership names of all labor contractors used to supply the employees.
• Employers must file on or before the second Wednesday of May every year (moved from March)
• Employers maintain records of job title and wage rate history for each employee for the duration of their employment and for 3 years after employment ends.

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Update (8/17/22):

After publication of this blog, it was confirmed that the appropriations committee has rejected the public reporting portion of this law.

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SB 1162, a California bill that was introduced on February 17, could enhance the current pay transparency, and pay reporting laws. The new bill, which is an update to SB 973, will:

• Require covered employers to post pay ranges on all job postings
• Change pay reporting requirements by requiring additional pay data within each EEO-1 Job Category, race/ethnicity, and gender combination
• Introduce California as the first state in the nation to require public pay disclosures for companies with at least 250 employees.

Pay Transparency

Current California law requires employers to provide external applicants a starting pay range “upon reasonable request” by the candidate, and only at a certain stage of the recruitment process (after an initial offer has been made). This new legislation proposes that employers with 15 or more employees provide a pay range on all job postings (similar to the law already enacted in Colorado and New York City). The pay range refers to the “salary or hourly wage range that the employer reasonably expects to pay for the position”. The proposed legislation also expands this right to current employees at California employers by requiring the organization to tell current employees their job positions salary range if requested. In addition, the legislation would require employers to maintain records of job titles and wage rate history for each employee throughout the duration of their employment plus 3 years after the end of the employment. Violators could be subject to a civil penalty of no less than $100 but no more than $10,000 per violation.

Pay Reporting

SB 973 currently requires employers with 100 or more employees to provide:

• The number of employees by race, ethnicity, and gender in each of the 10 EEO-1 Job Categories
• To categorize these groupings into Pay Bands similar to those used for EEO-1 Component 2
• To provide this information for employees that report into or out of California

The updated legislation will require private employers with 100 or more employees to submit a pay data report that also discloses the median and average hourly rate of pay for employees within each job category, race/ethnicity, and gender combination. This requirement would be due on the “second Wednesday of May” starting in 2023. If an employer does not provide the report, the first time they could receive a monetary penalty of up to $100 per employee, with all subsequent failures to file being a penalty of up to $200 per employee.

When signed into law, this proposed legislation will lead to California publishing private employers’ pay data report on a website that will be available to the public. The published data will be reported as provided to the state, meaning, that it will be group level data and will not identify any individual employee. No data would be published publicly for the 2023 and 2024 years in an attempt to give organizations time to review the equity at their organization and be prepared for public release. The current proposed public release schedule will allow California to publish the pay data report in:

• 2025 (2024 data) for employers with 1000 or more employees
• 2026 (2025 data) for employers with 500 or more employees
• 2027 (2026 data) for employers with 250 or more employees

This bill is currently in committee. Please check back to Berkshire’s blog as this will be updated as we learn more.