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New Guidance Released for SB 1162 – California’s Pay Scale Disclosure Requirements

As part of California’s ongoing efforts to promote workplace pay transparency, Senate Bill 1162, which amends Labor Code section 432.3 and Government Code section 12999, went into effect on January 1, 2023. On December 27, 2022, the California Labor Commissioner’s Office released FAQs on the new pay scale disclosure requirements. This blog discusses the guidance provided by those FAQs, and provides takeaways for employers faced with the implications of SB 1162 as we ring in 2023.

Which Employers Must Comply?

As of January 1, 2023, an employer with 15 or more employees who announce, post, publish, or otherwise make known a job posting must disclose the pay scale for a position “in any job posting.” If an employer uses an outside recruiter or other third party to “announce, post, publish or otherwise make known a job posting”, it must provide the pay scale to the third party to include within the job posting.

The FAQs state that the disclosure obligations apply to an employer with at least one employee currently located in California, consistent with how it counts employees for other purposes, such as minimum wage rates and 2022 COVID-19 Supplement Paid Sick Leave.

What About Remote Positions?

The FAQs state that “the pay scale must be included within the job posting if the position may ever be filled in California, either in-person or remotely.”

How is Pay Scale Defined?

Pay scale is the “salary or hourly wage range the employer reasonably expects to pay for a position.” The Labor Commissioner clarifies that an employer is not required to post additional compensation or tangible benefits in a job posting, but employers may include this information to make their recruitment efforts more competitive.

The Labor Commissioner provides further clarification on the following:

• Set Hourly Rate or Piece Rate: An employer who intends to pay a set hourly rate or set piece rate, and not a pay range, may provide that set hourly amount or set piece rate amount.
• Piece Rate or Commission: If the position’s hourly or salary wage is based on a piece rate or commission, which California law permits, then the employer must include in the job posting the piece rate or commission range the employer reasonably expects to pay for the position.

How Must the Pay Scale Be Disclosed?

The pay scale information must be included within the job posting. An electronic job posting that contains a “link” to a salary range or a QR code that directs an applicant to salary information is not sufficient.

What Records Must an Employer Maintain?

Starting January 1, 2023, employers must maintain records of the job title and wage rate history for each employee for the duration of employment plus three years after their employment ends. As a reminder, the records must be available for inspection by the Labor Commissioner.

Employer Takeaways

Employers should review all job postings live on or after January 1, 2023, to insure that they are compliant. The Labor Commissioner may order the employer to pay a civil penalty of no less than one hundred dollars ($100) and no more than ten thousand dollars ($10,000) per violation. A person may also bring a civil action for injunctive and other relief. Therefore, training for those responsible for posting (including third parties) may be very helpful, especially as employers recruiting for remote and/or hybrid positions face salary disclosure obligations in multiple states, counties and cities – and there are slight variations in the different laws. Currently, pay band disclosure laws are also enacted in Colorado, Connecticut, Maryland, Nevada, New York, Rhode Island, and Washington, as well as the District of Columbia, New York City, Toledo and Cincinnati, OH, Jersey City, NJ, and Ithaca, NY and Westchester County, NY.

Employers should also confirm that they have the appropriate record-keeping mechanisms in place for employee job titles and salary/wage histories during employment, and for the three-year period thereafter. Areas that may warrant special attention include capture of any off-cycle title/salary adjustments and collection of records as a result of any M&A activity and/or due to integration of new HR-IS systems.

However, the challenge for employers is more than just compliant postings and record-keeping. Employers need to be prepared to respond to questions from existing employees about their salaries, keeping in mind that under California law an employer must provide a current employee with the pay scale for their position upon request. Also, employers should expect to face an increase in pay equity claims given the increased availability of wage data.  Employers should conduct privileged pay equity audits to confirm that the pay scales set for positions are accurate and appropriate. These audits address whether current employee pay is set appropriately and that factors used to determine pay are appropriately applied.

Employers should keep in mind that the California FAQs also note that while employers do not need to post bonuses, tips and other benefits, “other forms of compensation may be considered for equal pay purposes.” Therefore, when conducting privileged internal pay equity audits employers should be sure to review total compensation, not just salary or hourly wages.