California has been at the forefront of creating equal pay laws, working toward eliminating ethnic, racial, and gender disparities, and closing the gender wage gap. Recent legislation signed into law aims at bolstering pay equity and transparency laws. Pay equity aims to compensate employees with similar duties, tasks, responsibilities, and other job functions with comparably or equitably equal pay, regardless of characteristics such as but not limited to gender, race, and ethnicity.
According to the Bureau of Labor and Statistics, the gender wage gap currently sits at women making an average of 88 cents per dollar men make. The gender wage gap is only one example of a disparity many Californians face. To promote pay equity, California Governor Gavin Newsom signed Senate Bill 1162 on Sept. 27, 2022, the state’s pay transparency law. Under SB 1162, employers will have to comply with updated requirements related to salary and pay disclosures to employees by Jan. 1, 2023. In addition, most California employers will be obliged to include information regarding their pay scale in their job postings.
Critical Updates Under SB 1162
Applicants for California jobs are already required to be provided with their pay scales upon “reasonable” requests. In addition to including a pay scale in any advertisements for jobs for employers with 15 or more employees, pay scales must also be present in positions posted by third parties. The amended law will take effect in January 2023. Pay scale refers to both a salary or hourly pay range the employer reasonably intends to offer, but (as of now) no guidance has yet been provided regarding the inclusion of commissions, bonuses, or other financial gains and incentives.
Outlined Below are additional critical points to SB 1162 and CA Labor Code 432.3:
- Employers must submit reports on pay data to the Department of Fair Employment and Housing (DFEH).
- Reporting should include the mean and median hourly compensation rates for employees based on race, ethnicity, and gender categories.
- Employers who have fifteen or more employees are required to specify pay ranges, as mentioned above, in all job postings.
- Current employees are entitled to receive the pay scale for their positions upon request from their employers.
- In addition to maintaining records of job titles and wage rates for each employee throughout employment, employers must preserve records for three years after termination or any reason for ending the engagement.
- Under SB 1162, employers will now be required to include in their required reports a breakdown of their employees by the characteristics of sex, ethnicity, and race for roles ranging from the senior, executive, and mid-level employees and managers, professionals and technicians, sales representatives, administrative workers, craft or trade workers, operational workers, all laborers, assistants, and service positions, from the designated snapshot timeframe.
- For each of the above-described roles, the number of employees by race, ethnicity, and sex whose annual earnings are within the pay bands established by the US Bureau of Labor Statistics must be provided. The information will be based on the employee’s W2 earning statements. In addition, employers with more than one company or venture must submit a unique report for each business.
Penalties for Violations of Labor Code 432.3 and SB 1162
California will be taking violations of the legislation seriously. In the Golden State, an employer who fails to file a pay data report for the first time may be subject to a civil penalty of $100 per violation. The penalty can be increased to up to $200 for further infractions. According to the newly enacted law, if an employer violates Labor Code Section 432.3, a civil penalty of at least $100 and up to $10,000 may be imposed by the Labor Commissioner. Thus, employers should work to increase transparency and promote pay equity, and certainly comply with the most up-to-date laws and any subsequent revisions or guidance.
Consult an Attorney for Further Help
For all employers in California, your policies, job postings, and pay ranges must be correctly published and updated in response to the new legislation. Waiting for the new year’s start could create room for error and administrative burdens. It may be wise to have a skilled employment attorney answer any questions or provide an in-depth review to ensure your business is in line with the latest changes, as they are complex, and violations can be costly.
As an employee or former employee, if your requests are being ignored or any of your rights as an employee have been violated, consulting a lawyer is critical. In addition, if you have been discriminated against, retaliated against, or have experienced any other employment or labor code violations, contact an experienced California employment lawyer to schedule a free and confidential consultation.
