SB 1162: California Expands Pay Transparency Requirements

California’s new pay transparency law requiring disclosure of pay scales in job openings went into effect on January 1, 2023. The new law requires California employers to disclose the pay range for a job if an applicant asks for it after an initial interview, and it further requires private employers with 100 or more employees to submit a pay data report annually to the California Civil Rights Department.

SB 1162 also extends the current pay transparency framework of the Equal Pay Act by requiring all employers, upon request, to provide current employees the pay scale for the position in which the employee is currently employed, and employers with 15 or more employees are required to include the “salary or hourly wage range that the employer reasonably expects to pay for the position” in any job posting, including postings made on their behalf by third-party companies. In addition, employers must maintain documentation of an employee’s job title and the wage history for each employee for the duration of the employee’s employment and for three years after that.

As addressed further below, in December 2022, the California Labor Commissioner’s office released guidance that clarifies several outstanding questions regarding compliance with SB 1162.

1. Annual Pay Data Report

As noted above, SB 1162 requires a private employer with 100 or more employees to submit a pay data report to the Department that includes the median and mean hourly rate for each combination of race, ethnicity, and sex within each job category. Private employers must also submit a separate data report covering employees hired through labor contractors. Pay data reports are due the second week of May each year. For 2023, the deadline is May 10.

2. 15 Employees or More

SB 1162 has amended Labor Code section 432.3 so that it now applies to an employer with 15 or more employees. Through reference to its prior guidance on Supplemental Paid Sick Leave, the Labor Commissioner interprets the 15-employee threshold to apply when: 1) an employer reaches 15 employees at any point in a pay period, and 2) at least one employee is currently located in California. If an employer has more than one facility, all employees are counted, as well as out-of-state employees for purposes of making this calculation.

3. Addressing Remote Work

For businesses that operate outside of California but have remote employees who work in California, or for employers that have employees in California who render services nationwide, the Labor Commissioner has clarified that the pay scale must be included in the job posting if the position may ever be filled in California, either in-person or remotely.

4. Defining Pay Scale

Section 432.3, as amended by SB 1162, defines “pay scale” to mean the salary or hourly wage range the employer reasonably expects to pay for a position. An employer who intends to pay a set hourly amount or a set piece rate amount, and not a pay range, may provide that set hourly rate or set piece rate. The Labor Commissioner has clarified that pay scale does not need to include bonuses, commissions, tips, or other benefits.

5. Manner of Disclosure

In a key departure from some other jurisdictions that have enacted pay scale disclosure requirements, California employers cannot link to the salary range in an electronic posting or include a QR code in a paper posting. The Labor Commissioner’s guidance states that the pay scale must be included on the posting itself.

6. Potential Remedies

SB 1162 amends California Government Code Section 12999 to permit a court to impose a civil penalty of up to $100 per employee on any employer who fails to file the required report, and a civil penalty of up to $200 per employee for any subsequent violation.

Additionally, a person may file a complaint with the Labor Commissioner’s Office within one year after the date that the person learned of an employer’s violation of the pay transparency requirements outlined in Section 432.3. A person may also bring a civil action for injunctive relief and any other relief that the court deems appropriate. Upon finding that an employer has violated Section 432.3, the Labor Commissioner may order the employer to pay a civil penalty of $100 to $10,000 per violation, depending on the totality of the circumstances (i.e., repeat offender, no effort to comply, etc.). SB 1162 makes clear that there is no penalty for first violations where an employer shows that “all job postings for all positions have been updated to include the pay scale.”

SB 1162 also adds express anti-retaliation protections for workers who assist employees with bringing claims under that section of the Act. The Labor Commissioner further clarifies that an employee must file a retaliation claim with the Labor Commissioner’s Office, the state agency charged with enforcement, within one year of the retaliation. Alternatively, an employee may file a civil action for retaliation in court within one year of the retaliation. An employee does not have to file a retaliation claim with the Labor Commissioner before filing an action in court. An employee who prevails in a retaliation claim may be awarded reinstatement, back pay, interest on back pay, and possibly other remedies.

Next Steps for Employers

The Labor Commissioner does not clarify whether the requirements only apply to postings made on or after January 1, 2023, or if they apply to all postings that remain active as of January 1, 2023. However, employers should ensure that all job postings posted as of January 1, 2023, contain the required pay scale information directly on the job posting and not through a link or QR Code. Employers may also consider contacting counsel to help protect against the litigation risks of non-compliance. ArentFox Schiff LLP is available to assist with these undertakings.


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