Complying with California’s New Pay Transparency Law Is Challenging

By loyCompliance, Equity, Regulatory Reporting

California’s new pay transparency law (SB 1162) took effect on January 1, 2023.  It expands the requirement for pay range disclosure and pay data reporting.

Some of the main provisions of the pay range disclosure include:

  • California employers with 15 or more employees must include a position’s salary or hourly wage range in any internal or external job posting
  • Employers must provide the employees’ position’s salary or hourly wage range to those who request it
  • Employers must also provide the position’s salary or hourly wage range upon request to external applicants seeking employment
  • Provides for a civil penalty of up to $10,000 per violation of its pay scale (wage range) disclosure and job posting requirements

Last year California passed a law that requires reporting numerical counts of employees by race, ethnicity and sex within each job category’s pay band, on an annual basis.  The reports were similar to the defunct EEO-1 Component 2 form. SB1162 expands this, requiring employers to report the median and mean hourly rate, broken down by race, ethnicity, and sex, for each job category.

The annual reporting requirement applies to employers with 100 or more U.S. employees with at least one employee in California.  In addition, employers who have retained at least 100 individuals through labor contractors the prior calendar year must similarly report data on the contractors.

The state of California created a template for last year’s reporting requirement.  As of January 1, 2023, they have not published a revised template for 2023.  Nonetheless, the 2023 reports are due on or before the second Wednesday of May 2023 (and on or before the second Wednesday of May of each year thereafter).

The usefulness of data on median and mean hourly rates will be limited. The mean (averages) does not account for differences in experience, education and performance.  Also, jobs having diverse skill requirements and market value are lumped into the same category.  For example, junior accountants are in the same category as senior engineers. Facilities managers are in the same category as engineering managers.   

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