Column: California Legislature passes pay disclosure measure

Late last month, the California legislature approved SB 1162 which, with the governor’s signature, will impose new disclosure obligations on many California employers. The measure has two major sections. The rationale for the measure was that greater transparency about pay will reduce pay gaps by race, ethnicity, and sex, even those gaps not resulting from intentional discrimination.

Large employers required to report pay data by race, ethnicity, sex to state agency

No later than the second Wednesday of May beginning in 2023, private employers with 100 or more employees, whether the employees are hired directly or through a labor contractor, will have to submit a pay data report to the California Civil Rights Department (formerly the Department of Fair Employment and Housing). The report must include, among other things:

· The number of employees by race, ethnicity, and sex in each of ten job categories, including high-level executives and managers; middle management; professionals; sales workers; administrative support workers; craftspeople; laborers; and service workers.

· The number of employees by race, ethnicity, and sex, whose annual earnings fall within pay bands used by the U.S. Bureau of Labor Statistics in its Occupational Employment Statistics survey.

· Within each job category, and for each combination of race, ethnicity, and sex, the median and mean hourly pay rate.

The department may ask a court to impose civil penalties on any employer that fails to submit the required information.

In publicly posting this information, the department must remove any “individually identifiable information,” meaning any data submitted “that is associated with a specific person or business.”

New pay range disclosure requirements

Under existing law, no employer may factor an applicant’s salary history into deciding whether to offer the applicant a job or, unless the applicant voluntarily discloses their salary history, into deciding what salary to offer the applicant. Existing law also requires all employers to provide job applicants who have completed an initial interview with the employer with the pay scale for the job sought upon reasonable request.

Starting Jan. 1, 2023, SB 1162 will require all employers, upon request, to provide all applicants with the pay scale, whether they have completed an initial interview or not. SB 1162 additionally will require an employer to provide “an employee the pay scale for the position in which the employee is currently employed.” The measure defines “pay scale” as “the salary or hourly wage range that the employer reasonably expects to pay for the position.”

The new measure further will require employers with 15 or more employees to include a job’s pay scale in any job posting. The pay scale also must be included in any job announcement or posting by any third party, such as an online jobs platform.

Anyone claiming to be “aggrieved” by the failure of an employer to post the pay scale as required may file a written complaint with the Labor Commissioner or bring a civil action against the employer. The Labor Commissioner may impose civil penalties from $100 to $10,000 per violation for noncompliance.

The amount of the penalty will depend on “the totality of the circumstances, including, but not limited to, whether the employer has previously violated” the pay range posting requirement. For the first violation, no penalty will be imposed if the employer demonstrates that “all job postings for [all] open positions have been updated to include the pay scale as required” by this measure.

Nothing in the measure prohibits an employer from asking an applicant “about the applicant’s salary expectations for the position being applied for.” The applicant’s response to that inquiry, however, presumably will be informed by the information employers with 15 or more employees now will be required to include in posting the opening.

Dan Eaton is a partner with the San Diego law firm of Seltzer Caplan McMahon Vitek where his practice focuses on defending and advising employers. He also is an instructor at the San Diego State University Fowler College of Business where he teaches classes in business ethics and employment law. He may be reached at eaton@scmv.com. His Twitter handle is @DanEatonlaw.