California Gov. Gavin Newsom on Sept. 27 signed into law Senate Bill 1162, expanding pay reporting and disclosure requirements for most employers. The move follows actions by other states and jurisdictions that have called for more transparency into wages not just for employees, but temp workers and contractors as well.

“With SB 1162, California joins the burgeoning trend as just the latest jurisdiction to require more pay transparency in job postings and to employees,” wrote Marjorie Soto Garcia and Michelle Strowhiro of law firm McDermott Will & Emery in a JD Supra blog post. “In a departure from tradition, California is not the first in this space; several laws have already been enacted across the country in the last three years that require varying levels of pay range disclosures, including in the City of Ithaca [New York], New York City, Westchester County [New York], Jersey City [New Jersey], Colorado, Nevada and Washington.”

Effective Jan. 1, 2023, employers in the Golden State with 15 or more employees will be required to include pay scales in job postings; they must also provide current employees with the pay range for their job, if requested. In addition, the law extends the California Labor Code’s retention rules to require employers to maintain records of the job title and wage history for each employee for the duration of the employee’s employment and for three years following separation.

Temp and Contract Workers

SB 1162 also updated California’s current pay data reporting law to apply to employers using labor contractors such as staffing firms.

Under the existing law, California employers with 100 or more employees are required to file with the state an annual report detailing the number of their employees by race, ethnicity and gender in each of 10 job categories. The new law adds a requirement that employers with 100 or more workers obtained through labor contractors in the prior calendar year file a separate pay data report covering the workers obtained through the labor contractors, writes Jeffrey Horton Thomas of law firm Fox Rothschild LLP in a blog post. The reports must also include the names of the owners of the labor contractor companies.

The law defines “labor contractor” as “an individual or entity that supplies, either with or without a contract, a client employer with workers to perform labor within the client employer’s usual course of business.” The new pay data reports must include the number of those workers by race, ethnicity and gender in 10 specified job categories as well as the median and mean hourly rate of pay.

This requirement takes effect May 10, 2023.

Prepare for Opportunity

Employers should view this as “an opportunity to identify and correct potential disparities that they had not previously focused on,” The Washington Post quoted Jennifer Cormier, a partner at Ropes & Gray, a firm with expertise in employment law, as saying.

Companies could also benefit from understanding their rivals’ compensation packages for similar positions if they want to be competitive in the labor market.

“Ultimately, employers who embrace pay transparency could also potentially better attract top talent and increase employee morale,” Cormier said.

In their JD Supra blog post, Garcia and Strowhiro provide some ways to prepare for the new law:

  • Review all current job descriptions, job postings, promotion prospects and prospective transfers to determine the pay range to be reasonably set for an applicant or employee in those scenarios. Consider the pay range for those currently in such roles as part of this process.
  • Conduct a privileged pay equity audit with counsel and implement any appropriate adjustments in advance of the Jan. 1, 2023, effective date.
  • Review applicable collective bargaining agreements or proposals in the process of negotiations.