URGENT CA: California Pay Transparency 2023

Effective January 1, 2023, SB 1162 was signed into law, which aligns California with a growing national trend mandating pay transparency in the workplace. This sweeping new law imposes two significant requirements on covered employers: job-posting requirements and pay data disclosures. The law requires public and private employers with 15 or more employees to include a pay scale in job postings starting January 1, 2023. Companies with 100 or more employees must report to the state the pay data of their employees and contractors by race, ethnicity, and gender. It is not yet clear if the employees must be located in California or if nationwide employees are counted.

This effort toward pay transparency is meant to help employers to detect and avoid discriminatory pay patterns. It’s still unclear whether the proposed law in California will impact salary negotiations with job applicants.

California already requires employers to provide a pay scale for a position upon reasonable request by an applicant for the position they are applying for, but now any applicant is entitled to this information upon reasonable request, even without having to interview. An applicant is defined as someone who is “seeking employment with the employer and is not currently employed with that employer in any capacity or position.”

Further, all employers with 15 or more employees must include and provide existing employees with the pay scale for the position that they are currently filling upon request.

  • Pay scale is defined as salary or hourly wage range the employer reasonably expects to pay for the position.
  • Applicant is defined as one who is outside of the organization.
  • Employees have the right to ask and know the pay scale in their current role.
  • Smaller employers will still have to provide pay scale information to applicants “upon request”.

Job Posting Requirements: If the Company uses third-party boards or websites to announce, post, publish, or otherwise make known a job posting (examples: Indeed, LinkedIn, Monster, etc.), the Company must provide the pay scale to the third party, and it must include the required pay scale information in the job posting for all open positions. The law does not address whether nationwide job postings must comply if the opening could be filled by someone in California.

Records of job titles and wage rate history must be maintained for each employee for the duration of their employment plus three years after the end of employment. The State can inspect these records to see if there is a pattern of wage discrepancy for all open positions. Taking care of this now will provide the Company time to correct and avoid disparities and missing job posting information.

Reporting Requirements: California’s pay transparency law also further expands state pay data reporting requirements, which include employee sex, race, and ethnicity information, to cover contracted employees.

Employers with 100 or more workers must submit the expanded annual pay data reports that include pay data on employees hired through labor contractors to the California Civil Rights Department starting May 10, 2023, and every second Wednesday in May annually after that point. Employers must upload their data files using the California Pay Data Reporting Portal.

This reporting requirement is required regardless of whether the Company is subject to submitting EEO-1 reports.

Failure to file the report can lead to civil penalties of $100 per employee for the first offense and $200 per employee for subsequent violations. An employer with 100 employees could amount to a $10,000 fine. Larger corporations with several hundred employees in multiple establishments are looking at far more significant fines. The law authorizes the Civil Rights Department to recover the costs of compelling an employer to comply with the reporting requirements.

Next Steps

In preparing to comply with SB 1162’s broad requirements, employers should:

  • Consider conducting a privileged pay equity audit of their workforce and making related pay adjustments for any discrepancies as needed.
  • Determine the salary ranges for all existing positions.
  • Ensure that all job postings include the required pay scale information.
  • Pay special attention to similar pay transparency laws currently in effect or that will soon take effect in other jurisdictions if they have multistate operations.
  • Consider adopting a national policy addressing salary ranges to comport with the growing number of jurisdictions with pay transparency laws if they have multistate operations.
  • Ensure any records maintenance policies are updated to comply with the law’s recordkeeping requirements.

Guardian HR has partnered with ThinkWhy to help clients analyze salary data by position (standard and blended roles).

Below is the brochure outlining their services for your reference:

LaborIQ by ThinkWhy Brochure

For additional information, please visit the Forms Library in the client portal and access the folders California / CA Pay Transparency, as well as Compensation and Payroll / Pay Transparency. Additional information on the reporting requirement can also be found at https://calcivilrights.ca.gov/paydatareporting/.  

For clients with questions regarding this topic, please contact your Guardian HR dedicated Manager.

If you wish to become a client of Guardian HR and get access to all our resources, including your own dedicated consultant and our team of employment attorneys, please contact us at sales@guardian-hr.com or call us at 888-373-4724.