Effective January 1, 2023, California employers must comply with Senate Bill (“SB”) 1162, which imposes new rules for disclosing pay range information to applicants and employees and new recordkeeping and reporting requirements. 

With this law, California joins a growing number of other jurisdictions that have recently passed similar laws requiring pay scales to be disclosed in job postings, including Colorado, Washington, and New York City. 

New pay disclosure rules and enhanced record keeping requirements

Under existing pay transparency laws in California, employers cannot ask applicants for salary history or rely on salary history information of an applicant in determining whether to offer employment or what salary to offer to an applicant, and employers are required to provide pay scale information to applicants only upon request. Effective January 1, 2023, SB 1162 amends California Labor Code 432.3 in an effort to expand pay transparency in the following three ways:

First, employers with 15 or more employees must include the pay scales for positions in job postings, including if the employer uses a third party to post the job. “Pay scale” is defined as the salary or hourly wage range that the employer reasonably expects to pay for the position.

Notably, the law does not expressly say whether the 15 employee threshold counts only employees located in California or all employees, regardless of state. But given the broad language of the law and how other employment laws in California are interpreted, employers would be safe to assume the threshold counts all employees in all states.

SB 1162 also does not expressly say whether the disclosure requirements apply to job postings for positions outside of California if posted by a California employer with more than 15 employees; the law also does not expressly say whether it applies to postings by employers outside of California who are hiring workers based in California, if those employers do not have 15 or more employees in California. Notably, other jurisdictions with similar pay transparency laws (e.g., Colorado, New York City), expressly apply to remote roles if they can be performed from the jurisdiction. 

Second, all employers must provide the employee with the pay scale for his or her current position on request.

Third, the amendments require employers to maintain records of job title and wage rate history for each employee for the duration of the employment plus three years after the end of the employment.

Employers will not incur penalties for a first violation, if corrected. Subsequent violations may incur civil penalties of US$100-US$10,000 per violation. The law also provides for a private right of action. 

New pay data reporting requirement

SB 1162 also amends Government Code 12999 to require employers with 100 or more employees, whether hired directly or through labor contractors, to submit a pay data report to the California Civil Rights Department (“CRD”)¹ beginning in May 2023. SB 1162 deletes the provision authorizing an employer to submit an EEO-1 in lieu of a pay data report. The pay data report must include information on the number of employees by race, ethnicity, and sex by position, as well as the mean and median pay rates by grouping. 

Failure to submit the required report could result in penalties up to US$200 per employee. 

Key takeaways

• Employers with any employees in California should determine now whether they will be covered by the pay disclosure rules;
• Covered employers should begin preparing now by reviewing pay data to ensure pay equity, revising job posting templates and procedures, as well as by training management and human resources on the new requirements before they take effect January 1; and
• Employers should take special note to check applicable laws before posting for remote jobs that could be performed from a number of jurisdictions.

If you have any questions or want to know more about the potential impact of these changes on your business, please reach out to one of the contacts listed in this alert.

1. CRD is the agency formerly known as the Department of Fair Employment and Housing. ↩