With California’s SB1162 expanding pay reporting and disclosure requirements for employers with more than 15 employees, the state joins New York (June 2022) and Colorado (January 2021) in enacting a policy requiring salary ranges to be listed in job postings.
Meanwhile, several other states have passed so-called pay transparency laws requiring the disclosure of salary ranges to applicants and employees on request. This list includes California’s Labor Code, which was amended in 2018 to prevent an employer relying on the salary history of an applicant when deciding whether to offer employment. Section 432.3 was also amended to require an employer, upon reasonable request, to provide the pay scale for a position to an applicant applying for employment.
Connecticut (October 2021), Maryland (October 2020), Rhode Island (January 2023) and Washington state (July 2019) also require employers to disclose the pay range to applicants upon request. Nevada (October 2021) requires disclosure even without a request. Washington also requires that employers provide the salary range to employees who are changing roles, if they request it. And Rhode Island entitles employees to pay range disclosures upon hire, when changing jobs, and if they ask for it.
Colorado has the most stringent rule on job postings. An employer with a single employee in Colorado must include when recruiting for each job posting the hourly or salary rate of compensation or range for the role and a general description of all benefits and other compensation to be offered to the hired applicant. The Colorado Department of Labor and Employment has clarified that compliance with its transparency rules is required in a job posting as long as the employer has at least one Colorado employee at the time of publication and the job is tied to a location in Colorado or is advertised as being remote. The CDLE has further clarified that employers cannot get around the transparency rules by explicitly excluding from consideration applicants in Colorado.
California’s SB1162 does not go that far, but it does require employers with more than 15 employees to include a pay scale in all job postings and to provide that information to third parties who post jobs on their behalf, such as staffing firms. However, no penalty will apply for a first violation of this requirement if the employer can show that all job postings for open positions have been updated to include the pay scale.
However, California’s new law dramatically expands the scope of potential employers covered as well as their pay data reporting obligations. Previously, only private employers with 100 or more employees were required to submit pay data reports to the department if they were already required to file an annual EEO-1 Employer Information Report. Employers were also permitted to submit their annual EEO-1 report to satisfy the state’s pay data reporting obligations.
Pay data reports. From Jan. 1, 2023, all private employers with 100 or more employees will be required to submit pay data reports, regardless of federal EEO-1 reporting status. And employers can no longer submit an EEO-1 in lieu of a pay data report. In addition, under the new law, employers with multiple establishments must continue to submit a separate report for each establishment. Employers will no longer be required to submit a consolidated report that includes all employees across establishments as the existing law required.
Similar to existing requirements, pay data reports are to be based on a “snapshot” of W-2 earnings during a single pay period from October through December of the previous calendar year. The pay data report must break out the number of employees by race, ethnicity and sex in a series of job categories and must report the number of employees by race, ethnicity, and sex whose earnings fall within each of the pay bands prescribed in the Bureau of Labor Statistics’ Occupational Employment Statistics survey. Significantly, there is a new requirement that employers identify the median and mean hourly pay rate for each combination of race, ethnicity and sex (intersectionally) for each job category.
Contract worker reporting. In a further extension to existing requirements, private employers with over 100 employees hired through one or more labor contractors in the prior year will also be required to submit a separate pay data report covering those contract workers. The new law broadly defines “labor contractors” to include both individuals and entities “that supply workers, either with or without a contract,” “to perform labor within the client employer’s usual course of business.”
Although the new law requires each labor contractor to provide employers with the necessary pay data to complete the reports, covered employers are ultimately responsible for the reports and must disclose the ownership names of any labor contractors who supplied workers in the previous year.
California employers that fail to submit the required annual reports may face fines of up to $100 per employee for initial violations and up to $200 per employee for subsequent violations, in addition to potentially being responsible for the Department’s costs associated with obtaining a court order to ensure compliance.
Filing deadlines. Pay data reports are now due annually on the second Wednesday of May. The first report is due on May 10, 2023, based upon calendar year 2022 pay data. Covered employers should start preparing now to comply with the new requirements to disclose pay scales in job postings and maintaining job title and pay rate history records. Obtaining the required information from labor contractors may prove time consuming, so employers should request the information well in advance of the May reporting deadline.