California beefs up employer pay transparency and reporting requirements

Last week, Governor Newsom signed a new California law strengthening existing pay transparency laws and, for the first time, imposing new data reporting requirements on employers.

Key takeaways of SB 1162

1. Beginning January 1, 2023, companies with 15 or more employees must disclose pay scales—defined as the "salary or hourly wage range that the employer reasonably expects to pay for the position"—in job postings. This includes jobs posted on third-party websites or handled by recruiters. Prior California law only required employers to provide this information to applicants upon reasonable request. Companies must also provide this information to current employees upon request.

2. The state is empowered to punish violations of this requirement with a civil penalty between US$100 to US$10,000 per violation, and individual applicants and/or employees may bring a private action for injunctive and other relief.

3. By May of each year, companies with 100 or more employees must report to the state "the median and mean hourly rate" of pay for each combination of race, ethnicity and sex within the following job categories:

• Executive or senior level officials and managers;
• First or mid-level officials and managers;
• Professionals;
• Technicians;
• Sales workers;
• Administrative support workers;
• Craft workers;
• Operatives;
• Laborers and helpers; and
• Service workers.

4. Employers with multiple establishments must submit a report covering each establishment.

5. Failure to disclose this information may result in penalties of US$100 per employee for an initial violation, and US$200 per employee for any subsequent violation.

What does this mean for employers?

Employers are understandably vexed whenever a new law imposes onerous reporting requirements, particularly when that law promises steep penalties for violations. Nonetheless, in practice, most employers need not fear. Prior to SB 1162, many California companies have already been providing similar data reports. For example, companies with 100 or more employees—which were obligated to file an annual Employer Information Report (EEO-1) under federal law—were required not only to submit data on the race, ethnicity and sex of its employees in the above job categories, but also to identify the US Bureau of Labor pay-bands those employees fell into. SB 1162 adds another layer of data to the report and makes it mandatory for all qualifying employers regardless of whether or not they are required to make federal reports.

The new law also requires retention of job title and wage-rate history for each employee for the duration of their employment plus three years after the end of their employment "in order for the Labor Commissioner to determine" if there is a pattern of wage discrepancy. Nothing, however, would restrict plaintiffs' counsel from demanding these records in discovery.

We anticipate guidance from the state in the coming months, and will continue to monitor all developments. Further, individual and class action lawsuits may begin early next year. If you have any questions concerning the new law, please reach out to Norton Rose Fulbright's California employment team: Josh Henderson, Ryan McCoy and Phillip Di Tullio.