California Pay Transparency Bill Awaits Governor’s Signature

06 September 2022 Labor & Employment Law Perspectives Blog
Author(s): Christopher Ward Brooke C. Bahlinger

In line with a current trend across the country, the California Senate recently sent a bill to the Governor’s desk that will require certain employers to include compensation information in job postings along with other pay scale disclosure requirements.  As we previously reported on Colorado, New York state, and New York City, there are subtle differences between each jurisdiction’s pay transparency laws, and therefore, employers should seek guidance in seeking to comply. 

Job Posting Requirements (Employers with 15 or more Employees)

If signed into law – and all indications are that Gov. Gavin Newsom will do so – the California bill’s job posting requirements will apply to any employer with 15 or more employees.  Covered employers must include the pay scale (defined as the salary or hourly wage range that the employer reasonably expects to pay for the position) in all job postings.  Unlike other pay transparency laws, the bill does not illustrate whether it applies to job postings for positions that could or will be performed in California.

The pay scale must also be included in any third party postings if a covered employer engages a third party to do so.  Employers that hire third parties to handle job postings should consider adding an indemnity clause in favor of the employer to any service agreement.

Pay Scale Disclosure Upon Request (All Employers)

In addition to the job posting requirements, all employers (regardless of size) must provide the pay scale upon a current employee’s or applicant’s request (either for the position in which the employee is currently employed or for the position an applicant is applying for).

Record Retention (All Employers)

The bill also requires employers to maintain records of job titles and wage rate history for each employee during the duration of employment and for three years after the end of employment.  These records will be open to inspection by the Labor Commissioner.

Pay Data Report Requirements (Private Employers with 100 or more Employees)

If signed into law, the California bill’s pay data report requirements will apply to any private employer with 100 or more employees.  The bill does not specify that those employees have to be employed in California but defines employees broadly as any individual on an employer’s payroll (including part-time individuals) and for whom the employer is required to withhold federal social security taxes.

Covered employers must submit a pay data report to the Civil Rights Department (formerly known as the Department of Fair Employment and Housing until its name changed in July 2022) on or before the second Wednesday of May 2023 (May 10, 2023) and on or before the second Wednesday of May for each year thereafter.  An employer that has 100 or more employees hired through labor contractors within the prior calendar year must also submit a separate pay data report covering the employees hired through labor contractors in the prior calendar year.

The pay data report must include a “snapshot” of the number of employees by race, ethnicity, and sex in specific job categories, and the number of those employees by race, ethnicity, and sex whose annual earnings fall within the pay bands used by the United States Bureau of Labor Statistics in the Occupational Employment Statistics survey (and the total hours worked by each employee counted in each pay band), the median and mean hourly rate of those employees within each job category for each combination of race, ethnicity, sex, and the employer’s NAICS code. 

Employers with multiple establishments will be required to submit a separate report for each economic unit producing goods or services.  The bill also allows the Department to publish aggregate reports based on the data obtained (with the caveat that the aggregated reports will be reasonably calculated to prevent the association of the data with any business or person). 

Penalties / Private Right of Action

The penalties associated with not complying with pay scale disclosure or the record retention requirements are between $100 to $10,000 per violation (with the caveat that no penalty will apply to any employer who first violates the job posting requirement if an employer can demonstrate that all job postings have been updated to include the pay scale).  The penalties associated with not submitting the pay data report are up to $100 per employee for the initial failure to submit the report and up to $200 per employee for any subsequent failure to submit the report.

The bill provides that any individual who has been aggrieved by the pay disclosure requirements may submit a complaint to the Labor Commissioner and additionally provides that individuals may bring a civil action for injunctive relief and “other relief.”  Given this creation of a private right of action and California’s climate for employment and class action litigation, employers with operations in California should consider immediately consulting with counsel to mitigate against such litigation risks.

The bill is currently awaiting the Governor’s signature, who has until September 30th to sign or veto it.  We will continue to track this bill and post updates as they become available. 

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