New Pay Disclosure Requirements – SB 1162 – As of January 1, 2023

Though the bill aims to better equalize pay for all workers in the state, the new law will significantly increase reporting and disclosure burdens on employers.

Disclosure of Pay Scales

In 2017 the Legislature enacted Labor Code Section 432.3 (we previously wrote about AB 168 here), which prohibits all employers from inquiring into and relying on the salary history of an applicant.

Section 432.3 also requires employers, upon reasonable request, to provide the pay scale for a position to an applicant applying for employment. SB 1162 added the following requirements:

Provide pay scales to employees: On request, employers are required to provide an employee the pay scale for the position in which the employee is currently employed.

Post pay scales on job ads: Employers with 15 or more employees are required to include the pay scale for a position in any job posting (including through third party postings).

Different definition for “pay scale”: Previously, “pay scale” was defined as “a salary or hourly wage range.” SB 1162 changed this to “the salary or hourly wage range that the employer reasonably expects to pay for the position.”

Requirement to maintain pay records: Employers are required to maintain records of a job title and wage rate history for each employee for the duration of employment and three years after separation, for Labor Commissioner inspections. Failure to maintain records will create a rebuttable presumption in favor of an “employee’s claim.”

An aggrieved person’s claim: A person who claims to be aggrieved of a violation of Labor Code Section 432.3, may file a complaint with the Labor Commissioner within one year after the violation became known, and may also bring a civil action for injunctive relief.

Penalties: If the Labor Commissioner finds a violation occurred, it may order the employer to pay a civil penalty of $100 – $10,000 per violation. However, for a first violation re job ads, no penalty will be assessed if the Labor Commissioner finds that all job postings for an open position have been updated to include the pay scale as required.

Pay Reporting Obligations for Larger Employers

In 2020 the Legislature enacted SB 973 which required employers with 100 or more employees to submit a yearly pay data report to the California’s Civil Rights Department (CRD), in addition to the EEO-1 reporting required by the U.S. Equal Employment Opportunity Commission. The CRD report must include the number of employees categorized by race, ethnicity, and sex, along with their respective wages.

SB 1162 adds to the reporting obligations a requirement to disclose the median and mean hourly rate within each job category, for each combination of race, ethnicity, and sex.

Additionally, SB 1162 creates a new reporting requirement with respect to labor contractor employees and requires employers that have 100 or more employees hired through labor contractors within the prior calendar year, to submit to the CRD a separate pay data report covering these employees and the names of all labor contractors.

A labor contractor is defined as “an individual or entity that supplies, either with or without contract, a client employer with workers to perform labor within the client employer’s usual course of business.”