California’s New Pay Transparency Requirements in 2023

Summary: As of January 1, 2023, employers with 15 or more employees must include pay scale in job postings, all employers must provide pay scale to current employees who request the information for their position, employers must retain pay records for three years post-termination and employers with more than 100 employees must submit annual reporting of pay data to the Civil Rights Department.

Senate Bill 1162, a new pay transparency law signed by Governor Newsom in 2022, amended Government Code Section 12999 and Labor Code Section 423.3. The legislation is aimed at providing job applicants, current employees and the government with even more information about employers’ pay scales. Employers must comply with the additional reporting and transparency requirements that became effective January 1, 2023.

New Pay Transparency and Reporting Requirements:

1. All employers must provide the pay scale to current employees, upon the employee’s request, for the position they hold.
2. Employers with 15 or more employees must provide the pay scale in every job posting.
3. All employers must maintain records of job titles and wage rate history of each employee throughout their employment and for three years after employment ends.
4. Employers with over 100 employees must report pay data to the California Civil Rights Department, for the prior year, by the second Wednesday in May, in a format easily searchable with software, with the following information:
   • The number of employees by race, ethnicity and sex in each of the ten job categories listed in the statute.
   • The number of employees by race, ethnicity and sex, whose annual earnings fall within each of the pay bands used by the United States Bureau of Labor Statistics in the Occupational Employment Statistics survey.
   • Within each job category, for each combination of race, ethnicity and sex, the median and mean hourly rate.
5. A private employer that has 100 or more employees hired through labor contractors within the prior calendar year shall submit a separate pay data report to the California Civil Rights Department covering the employees hired through labor contractors in the prior calendar year.

Enforcement Actions for Non-Compliance:

1. The California Labor Commissioner is ordered to investigate potential violations and authorized to impose civil penalties ranging from $100 – $10,000 on employers who fail to comply with records retention, pay reporting and pay scale disclosure or job postings requirements.
2. An applicant or employee may file a complaint with the Department of Labor Standards Enforcement prompting an investigation by the agency. 
3. Applicants and employees may also seek injunctive relief in civil court to obtain the information about pay scale for their position or to force the publication of the pay scale on job postings.

Action Items for Employers:[1]

1. Determine which pay reporting and pay scale posting requirements apply to the employer, based on number of employees.
2. If applicable, gather the pay and personnel records necessary to compile and submit pay data to the Civil Rights Department. Calendar the submission deadlines and assign the task to the appropriate personnel or counsel.
3. Gather records about current and historical pay for all positions. Make an informed determination of the pay scale for all positions prior to posting any jobs (internal posting or on third party services) and prior to responding to employee requests.
4. Add pay scale information to all existing job postings hosted internally or by third parties. Update jobs previously posted so that they do not continue displaying without pay scale information. 
5. Contact experienced employment counsel to conduct a pay audit to determine whether appropriate documentation is in place and whether any adjustments need to be made to correct for pay disparities. 
6. Train Human Resources personnel on how to do create compliant job postings and how to respond to current employees’ inquiries regarding pay scale.
7. Update the employee handbook and policies to affirm compliance with pay transparency laws and direct employees to the appropriate procedure for requesting pay scale information.
8. Monitor growth of the workforce. If adding more employees places the employer into a new compliance category, e.g., reaching 15 employees triggers need to include pay scale in job postings and 100 employees triggers CRD pay data reporting requirements, the employer should immediately update its practices to meet those requirements and avoid civil penalties.

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[1] The content of this article is provided for general information purposes only.  No attorney-client relationship is created and no legal advice is given by this article.  Employers should contact employment counsel for specific advice regarding their situation.