California’s Pay Transparency Laws In Effect January 2023

Pay Reporting Changes for ALL California Employers

Governor Gavin Newsom signed California’s pay transparency law – SB 1162 – into law on September 27. It will come into effect on January 1, 2023, so employers do not have long to prepare for the changes. Here are the points you need to know: 

All employers must provide pay scale information upon request – from January 1, 2023. 

Employers of all sizes, including those with fewer than 15 employees, must now provide applicants and employees with pay scale information upon their request. 

Specifically: 

• Employers must provide the pay scale for a position to an applicant applying for employment upon their reasonable request. 
• Employers must also provide employees with the pay scale for their current position, upon request. 

Employers are also required to maintain records relating to the positions and the wage history for each employee. These records must be kept for the duration of the employee’s employment and for three years after the end of employment. The Labor Commissioner will be able to inspect these records. 

How to prepare for these requirements:

Employers should do the following (at a minimum) to prepare to meet these new requirements: 

1. Audit existing positions and determine an accurate pay scale for each. 
2. If you identify employees who are being paid less than their scale range, increase their pay. 
3. Implement or update your processes and policies for maintaining pay scale records for the required time period. 

Employers with 15 or more employees must include pay ranges in all job advertisements, from January 1. 

From January 1, 2023, employers with 15 or more employees must include the pay scale for a position in any job posting. This includes where the employer engages a third party to share the job posting. 

To prepare for this requirement, employers should follow the three steps outlined above. 

Pay data reporting requirements are increasing in May 2023. 

Private employers in California with 100 or more employees must submit pay data reporting to the California Civil Rights Department (CRD) on or before May 10, 2023 (the second Wednesday of May) and the second Wednesday of May every year thereafter.  

The SB 1162 requirements are more onerous than existing requirements, since they also require private employers with 100 or more employees hired through labor contractors to submit a separate report. 

The bill also requires covered employers to submit reporting on the number of employees by race, ethnicity, and sex in each of the following job categories: 

• 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. 

It must also include details of the number of employees by race, ethnicity and sex whose annual earnings fall within each of the pay bands used by the US Bureau of Labor Statistics, as well as how many hours worked by each employee in each pay band. Further, it must include information about the median and mean hourly rates for each combination of race, ethnicity, and sex within each job category.

Compliance Tips for Employers

California is just the latest state to implement pay transparency laws. It’s a trend that is unlikely to go anywhere, so employers should be preparing to adapt – starting with a pay audit.

If you need assistance implementing changes to prepare for California’s pay transparency law coming into effect, reach out. Our employment team would love to help.

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