California’s Requirements for Pay Transparency to Increase in 2023

October 6, 2022

RELATED UPDATE: New California Employment Laws Take Effect in 2023 (January 4, 2023)

On Sept. 27, 2022, in a continuing effort toward pay equity, California Gov. Gavin Newsom signed Senate Bill 1162, the state’s pay transparency law. S.B. 1162 brings a number of changes employers will need to implement by Jan. 1, 2023, pertaining to the disclosure of pay and salary information to employees and in connection with job postings.

S.B.1162 amends Cal. Lab. Code § 432.3 to require employers to provide the pay scale for a position to any applicant applying for employment, upon receipt of such request from the applicant. The amended Cal. Lab. Code § 432.3 also requires employers who receive a request from an employee to provide the pay scale for the position in which the employee is currently employed. Additionally, employers with 15 or more employees will now be required to include the pay scale for a position in any job posting, and this requirement extends to any third-party company hired by an employer to announce or publish an open position. Moreover, Cal. Lab. Code § 432.3 will now require employers to maintain job records reflecting the job title and wage rate history for each employee for the duration of their employment, plus for three years after the end of their employment.

Failure to abide by any of the above may subject the employer to civil penalties of $100 to $10,000 per violation. Employers can anticipate that it will not be long before plaintiffs’ attorneys begin including allegations of noncompliance with these new requirements in representative actions filed under California’s Private Attorneys General Act.

In addition to the changes to Cal. Lab. Code § 432.3, S.B. 1162 builds on a measure signed by Newsom in 2020 and requires additional reporting to the California Civil Rights Department within the Business, Consumer Services and Housing Agency.

Per the newly amended Cal. Gov’t Code § 12999, private employers with 100 or more employees will now be required to annually submit a pay data report to the California Civil Rights Department on the second Wednesday of May. The first report is due May 10, 2023, based upon 2022 pay data. Additionally, the pay data reports must now include the median and mean hourly rate for each combination of race, ethnicity and sex within each job category, and employers with multiple establishments will no longer be required to submit a consolidated report. Finally, employers with 100 or more employees hired through labor contractors have a new obligation to produce data on pay, hours worked, race/ethnicity and gender information in a separate report.

Employers who fail to file pay data reports may be subject to a civil penalty up to $100 per employee for initial failures to file and $200 per employee for subsequent failures to file.

With these changes that go into effect Jan. 1, 2023, California employers should be sure to take a close look at their job-posting and pay-data reporting procedures, as California continues to address pay equity from all fronts.

For assistance navigating and implementing these new standards, please contact the authors, your McGuireWoods contact or a member of the firm’s labor and employment team.