What is the “Pay Transparency Act”?
Governor Newsom signed Senate Bill 1162 (SB1162) on September 27, 2022. This bill, also referred to as “The Pay Transparency Act” is intended to amend California Government Code section 12999 and California Labor Code section 432.3 by expanding pay data reporting and increase pay scale transparency.
Over several decades, laws and regulations have been established to drive employers towards fair pay equity. Organizations such as the OFCCP and EEOC were created to uphold new laws that pass in that area of business.
Because disparity in pay still exists, this new law was created to improve transparency by requiring additional data collection and reporting, and to end retaliation to employees who discuss salaries.
What Does it Mean to Your Company?
As of January, 2023, if your company has 15 or more employees, you are required to include a position’s salary or hourly wage when posting internal or external open jobs. Additionally, current employees or external applicants seeking employment may request and receive the wage range for such positions. This part of the law is required by employers with less than 15 employees.
New Data Reporting Requirements
Prior California laws required employers with 100 or more employees to report pay data annually on 10 specific job categories to the California Department of Fair Employment (DFEH). This comes in the form of a “snapshot” of one pay period any time between October 1 – December 31 annually.
With SB1162, beginning in May 2023, the new data reporting was placed into effect which expands the DFEH reporting requirements. Employers must now include the median and mean hourly rate, broken down by ethnicity, race and sex for each job category.
Additionally, employers who have at least 100 workers paid through contracting firms (i.e. Temp agencies) working the previous calendar year – 2022, are also required to report the same pay data. All reporting is due by the second Wednesday of May each year.
Potential Liability Risk
This new reporting requirement could lead to claims of discrimination or equal pay violations if there are differences between protected categories of employees within the same job category. The civil penalty for failure to report is up to $100 per employee and $200 per employee for subsequent failures to report. While the pay data is not publicly shared, (a late amendment to the bill), it will likely be available upon request via FOIA or through civil discovery.
What You Can Do To Be Compliant
We recommend doing an internal audit of your current pay structures and developing fair and consistent wage ranges for each role, in addition to detailed standard job descriptions. The internal audit should compare all employees and contractors, and their current pay, broken down to each individual including their ethnicity, race and sex.
Additionally, it’s important to educate all relevant parties within your company. Particularly the leaders who are responsible for hiring and managing employees, and Human Resources teams involved in hiring, employee relations and compensation.
At The PJF Group, we support our clients by keeping up to date on new and changing laws and regulations. If you ever have any questions, be sure to contact us!