New Law Requires Pay Rate Disclosures

Currently, Labor Code 432.3 requires employers to provide the pay scale, i.e., the range of hourly or salary rates, to an applicant if requested after an initial interview.

SB 1162, effective January 1, 2023, mandates a greater level of disclosures:

• All California employers must provide pay rate information to applicants upon request even before an interview and to employees at any time.
• California employers with 15 or more employees must include pay scales in their own job listings or provide pay scale rates to third parties who post job listings for the employer and are required to include those pay rates.
• All California employers must maintain records of job titles and wage rate histories for all employees while employed and for three years after, subject to inspection by the Labor Commissioner. Failing to do so creates a rebuttable presumption in favor of an employee's claim.

Penalties for violations of this section range from $100 to $10,000 depending on circumstances, but first-time offenders that can prove they have fixed their job postings get a pass on any penalties.

If an employer has 100 or more employees, it must submit a pay data report by the second Wednesday of every May starting in 2023 (moved from the prior annual reporting date of March). This report must include:

• the number of employees by race, ethnicity, and sex in 10 job categories;
• how many employees by those same categories fall into various "pay bands" used by the United States Bureau of Labor Statistics in the Occupational Employment Statistics survey;
• the mean and median hourly rate for each job category broken down by race, ethnicity, and sex; and
• other, related data.

For non-compliance with these latter requirements, first time offenders can be penalized $100 per employee and subsequent offenses at $200 per employee.

The Division of Labor Standards Enforcement is expected to issue FAQs, which hopefully will answer many unanswered questions before the January 1 implementation date.

Take-Aways: Employers need to prepare for the implementation of this statute in less than two months. Covered employers should review job listings and update or replace them to include pay scales in those listings. All employers should review the various pay rates they have for a particular job against the race, ethnicity, sex, and other protected categories to see if there are unwarranted disparities in pay that should be addressed.

Employers should look to a knowledgeable employment attorney for assistance in implementing these new laws.

For further information, please contact Tim Bowles, Cindy Bamforth or Helena Kobrin.

See also:

• What's New In 2023 - Computer Software Professionals Overtime Exemption Rates (November 4, 2022)
• Find Out What's New In 2023 (October 26, 2022)

Helena Kobrin
November 11, 2022