California Legislature Passes Pay Transparency Law

Author: Emily Scace, Brightmine Legal Editor

September 7, 2022

The California legislature has passed a bill that would add the state to the growing list of jurisdictions that require pay ranges to be included in job postings and modify the state's pay data reporting requirements for large employers. If signed, S.B. 1162 will take effect January 1, 2023.

Pay Transparency

Pay transparency laws, often cited as way to advance pay equity, have been a rising trend. In 2021, Colorado became the first state to require employers to include compensation information in job postings. Similar laws take effect November 1 in New York City and January 1, 2023, in Washington. A New York State pay transparency bill has passed the legislature and is awaiting signature. In a handful of other states, an employer is required to share a pay range for a position with an applicant during the hiring process but need not include the information in a job posting.

The California bill would require employers with 15 or more employees to include a position's pay scale - defined as the salary or hourly range the employer reasonably expects to pay for a position - in any job posting. An employer using a third party, such as a recruiter or job posting board, to publish or announce a position would be required to provide the pay scale to the third party, which would be required to include the information in the job posting.

In addition, all employers, including smaller employers not covered by the posting requirement, would be required to:

• Provide the pay scale for a position to an applicant applying to that position upon reasonable request; and
• Provide the pay scale for an employee's current position upon the employee's request.

The law would also require employers to keep records of each employee's job title and pay history for the duration of employment, plus three years. These records would be open to inspection by the state to identify unjustified pay disparities.

Violations would be punishable by civil penalties between $100 and $10,000 per violation. However, an employer's first violation of the job posting requirement would not be subject to monetary penalties if the employer demonstrates that all job postings for open positions have been updated to include the required pay scale information.

Pay Data Reporting

Since 2021, many California employers have been required to submit an annual report to the state's Department of Fair Employment and Housing (DFEH) each year listing pay bands and job categories for employees broken down by race, ethnicity and sex. S.B. 1162 would:

• Expand the reporting requirement to apply to all private employers in the state with 100 or more employees (not only those required to file EEO-1 reports);
• Remove the option for an employer to substitute an EEO-1 report for the pay data report;
• Change the submission deadline to the second Wednesday of May each year; and
• Add a requirement for covered employers to calculate a mean and median hourly rate for each combination of race, ethnicity and sex within each job category.

A provision that would have required the DFEH to publish large employers' pay data reports online was stricken from the bill during the amendment process.

California Governor Gavin Newsom has until September 30 to sign the bill, veto it, or let it pass into law without signature.