California Senate Pay Transparency Bill Set to Become Law

A bill to increase pay transparency in California is about to become law.

Senate Bill 1162introduced in February and with some modifications since its initial form, passed the Assembly Appropriations Committee on August 11. There are only a few steps left before it becomes law this legislative session: (1) a full vote of the Assembly; (2) reconciliation with the Senate; and (3) Governor’s signature.

SB 1162 continues to focus on improving pay transparency. In its current form, the bill requires employers with 15 or more employees to include the salary range for the position in any job posting, including those posted through a third party. This reflects broader pay transparency trends nationwide, including requirements in Colorado, New York and Washington. The California bill also requires employers to provide the salary range for a position to applicants and employees upon request.

The bill no longer requires employers to notify employees of job openings before they are filled. This requirement necessitated significant process changes for Colorado employers.

Bill also expands payroll data reporting requirements for California employers. Currently, California employers must submit to the Department of Fair Employment and Housing (now, the Department of Civil Rights) a wage data report tabulating (A) the number of employees at each facility (B) by race, ethnicity and gender in each (C) job category (for example, professionals, technicians, laborers, and service workers) (D) who earned in each of 12 specific pay bands in the past year.

If the current version of the bill is passed, employers will also have to:

  1. Indicate the median and average hourly rate for each combination of race, ethnicity and gender for each job category; and

  2. Submit a separate payroll data report for employees hired through contractors (that’s to saycovering temporary help agencies) which also discloses the “property names of all labor contractors used to supply employees”.

An employer who fails to submit these required reports could be subject to penalties of $100 per employee (or $200 per person for repeated failures).

In short, this bill (if passed) will force employers to address any pay gaps and any diversity gaps within their workforce. While pay gaps can be closed through strong and equitable salary adjustments and compensation systems, diversity gaps may require long-term planning with a concerted external and internal DEI strategy. Identifying and understanding these shortcomings – and their causes – can also help avoid situations where discriminatory bias or other illegal actions can create legal risk.

© 2022 Jackson LewisNational Law Review, Volume XII, Number 229

Norman D. Briggs