Governor Newsom signed Senate Bill (SB) 1162 on September 27, 2022, expanding California’s existing pay transparency law (SB 793). Previously, California employers with 100 employees or more were required to report broad pay data (e.g., number of employees, hours worked by pay band). SB 1162 requires more transparency in salary information and expanded reporting requirements from most CA employers.
Expanded Transparency
There are two important points on the transparency front: 1) employers with 15 or more employees are now required to include salary ranges in ALL job postings; and 2) employers of any size are required to produce a salary range for an employee’s position at their request. This new reporting requirement has an added burden where employers must ensure that all recruiting staff and hiring managers have the correct salary range information. Note that employers must also document each instance where the salary range information is posted or provided to an employee.
The salary range transparency requirements will make it easier for current employees to understand their pay relative to their colleagues and gain insights into market salary rates (pay ranges for new hires). Employers must carefully balance all these considerations when establishing their pay ranges. Salary compression may become more evident to current employees and employers should be prepared to answer to the issue of compression.
Expanded Pay Data Reporting
There are also several important points on the pay data reporting front. First, SB 1162 increases the granularity of the pay data that employers must report, now requiring the median and mean hourly rate by race, ethnicity, and gender within each EEO-1 job category. This new reporting requirement will more directly show pay gaps in broad categories of jobs, which may only speak to workforce distribution issues, rather than pay equity or pay discrimination. Will this help our efforts to reduce and eliminate pay discrimination?
Unfortunately, the new reporting requirements do not necessarily serve Governor Newsom’s intended purpose. In his SB 1162 press release , he noted that “California has the strongest equal pay laws in the nation, but we’re not letting up on our work to ensure all women in our state are paid their due and treated equally in all spheres of life,” and “These measures bring new transparency to tackle pay gaps.” While the new reporting requirements certainly step-up California’s pay reporting requirements and put a shiny spotlight on pay gap issues, it does little to advance “equal pay for equal work” for women.
The above changes will provide a more direct view into the pay gaps within an employer. To be clear, pay gaps are not necessarily pay equity problems. Pay differences in broad job groupings often reflect the distribution of employees into higher/lower paying jobs within the grouping. While that is a serious problem, it’s not an “equal pay” issue.
Finally, employers are now required to report on temporary workers hired through staffing agencies (i.e., labor contractors). Employers are required to report the pay, hours worked, gender, and ethnicity for each temporary worker. It is incumbent upon the staffing agency to provide this information to the employer. If the staffing agencies do not already regularly and typically provide this information to the employer (which they most likely do not), employers should consider reminding the staffing agency of this new provision in preparation for 2023. Though ultimately, the buck will stop with the staffing agencies if they do not provide the necessary data. Failure to provide the necessary pay data information will result in an “appropriate amount of penalties” to the staffing agency. The bill lacks clarity on a number of requirements for these data, including what type of pay shall be reported. Is it the amount the employer paid the staffing agency or the amount the staffing agency paid the temporary employee? We hope to see more clarity on this when the report template is released.
SB 1162 will take effect January 1, 2023 and the first pay data report must be submitted on or before the second Wednesday of May, 2023. Presently the State of California has not released the template for the pay data report. Stay tuned to the BCGi blog for more information as the new report template is released and other updates related to SB 1162.
If you have questions about this or any other requirement for employers regarding compensation and pay equity, reach out to our People Insights team bmarentette@biddle.com.