SB 1162: Increased Pay Data Transparency Means More Hoops for California Employers to Jump Through

On Tuesday September 27, 2022, Governor Newsom signed Senate Bill 1162 (“SB 1162”) which goes into effect January 1, 2023. SB 1162 was marketed as a civil rights bill meant to “strengthen California’s commitment to advancing gender equity and protecting the rights of women.” SB 1162 has two main components which mandate “wage transparency” in an effort to identify gender and race-based pay disparities. The first component is a requirement that employers provide pay scale information to all job candidates and current employees. The second component expands pay data reporting requirements to allegedly better identify gender and race-based pay disparities.

There are already pay data reporting and pay transparency laws in place in California, however, the legislature apparently believed the compliance requirements were too relaxed. SB 1162 greatly expands these requirements, including placing some pay transparency requirements on small business owners.

Employers Must Provide Pay Scale Information to Job Candidates and Current Employees

SB 1162 makes significant changes to Labor Code Section 432.3 by requiring employers with more than 15 employees to provide the pay scale for the positions they are seeking to fill and requiring all employers to provide current employees with the pay scale for their position upon request. The job posting requirement applies to any thirdparty services employers may use, such as Indeed or ZipRecruiter. This expands the existing law which only requires that job candidates be provided with this information upon request. The Labor Code defines “pay scale” as the salary or hourly wage range that the employer “reasonably expects” to pay for the position.

A person who claims to be aggrieved by a violation of Labor Code Section 432.3 may file a written complaint with the Labor Commissioner within one year after the date the person learned of the violation and may also bring a civil action. Failure to comply with the new wage disclosure requirements can result in penalties up to $10,000 per violation. Employers can avoid penalties for their first violation of this requirement if the employer can show that all job postings for open positions have been updated to include the pay scale.

Additional Record Retention Requirements Under SB 1162

SB 1162 also introduces a retention requirement that employers maintain records of job titles and wage rate histories for the duration of an employee’s employment and three years after termination of employment and gives the California Labor Commissioner authority to inspect such records. Under this new law, a failure to retain records creates a rebuttable presumption in favor of an employee’s wage discrimination claim.

Expanded Pay Data Reporting Requirements

SB 1162 also makes significant changes to Government Code Section 12999, a law first created in 2020, which required large employers (100 or more employees), to submit pay data information broken down by gender and race/ethnicity across ten job categories. In addition to the already burdensome requirements, the pay data reports must now require the median and mean hourly rate for each combination of race, ethnicity and gender within each job category. The reporting requirements apply to all private California Employers with at least 100 employees. This now includes a private employer which has 100 or more employees hired through a labor contractor; i.e., staffing agency, farm labor contractor (FLC), etc… Labor contractors are required to “supply all necessary pay data to the private employer”

and allows an “appropriate amount” of any penalties issued for violating this section to be apportioned to the labor contractor which failed to provide the employer with the required data.

Existing law requires employers with multiple establishments to submit a report for each establishment and a consolidated report that includes all employees. With the passage of SB 1162, multi-establishment employers are no longer required to submit a consolidated report but must continue to submit a report for each establishment.

Employers who fail to file pay data reports may be subject to a civil penalty up to $100 per employee for initial failures and $200 per employee for subsequent failures. The new law authorizes the Civil Rights Department (“CRD”) (formerly known as the Department of Fair Employment and Housing or “DEFH”) to seek a court order requiring employers to comply with all requirements and to recover costs associated with seeking compliance. Previously due every March, reports are now due annually on the second

Wednesday of May. The first report is due on May 10, 2023, for 2022 pay data.

What This Means for Employers

Employers must act now to comply with the new pay scale transparency and record keeping requirements and should start preparing for their reporting requirements. Although there are penalties for not complying with the new requirements, the greatest liability can be found in the substance of the pay data being reported. Auditing pay data now can reveal pay disparities that employers did not know existed. It is imperative that such disparities be addressed as soon as possible to avoid a civil suit or a class charge of discrimination. The attorneys at Barsamian & Moody are available to address any concerns regarding how to comply with the new disclosure, record keeping and reporting requirements.

The goal of this article is to provide employers with current labor and employment law information. The contents should neither be interpreted as, nor construed as legal advice or opinion. The reader should consult with Barsamian & Moody at (559) 248-2360 for individual responses to questions or concerns regarding any given situation.