California Pay Transparency

A special thanks to Amplify's Talent Partner Natasha Katoni for her help with this article.

On January 1, 2023, California’s new Senate Bill 1162 law surrounding pay disclosure and reporting went into effect. Note that, although other states have similar pay transparency laws, we’re focusing only on California in this article. So, here’s a summary of California’s new requirements:

• Pay Disclosure: Employers with over 15 employees are now required to include pay ranges in all job postings. Also, all employers must provide current employees with the pay scale for their position upon the employee’s request.
• Pay Data Reporting: As of May 2023, employers with over 100 employees are required to report expanded pay data information. 

Legal Details (Pay Disclosure)

In Job Advertisements: Employers with over 15 employees are required to include the pay scale for a position in every job posting (i.e. job advertisements, descriptions, etc.).

• Pay scale means the “salary or hourly wage range that the employer reasonably expects to pay for the position.” 
• Any third parties that the employer uses to assist with hiring must include this information in their postings as well.

In Response to Current Employee Inquiries: All employers are required to provide the pay scale for the position (i.e. the level / title) in which a current employee is employed, upon that employee’s request.

All employers must also maintain records of job title and wage history for each employee during that employee’s tenure at the company, and for 3 years afterward.

If a company doesn’t include pay scale in its job postings and is therefore found to have violated this law, it may be subject to civil penalties between $100-$10,000 per violation. But, no penalties will be assessed for the first violation if the company promptly updates all of their job postings to include pay scale information.

Pay Data Reporting

The bill also requires employers with over 100 employees to submit annual pay data reports to California’s Civil Rights Department. The reports must include race, ethnicity, and sex information of all employees by job category, along with other information regarding hourly rates and annual earnings. To see the full list of reporting requirements, refer to Section 12999(b) of the bill, or go to the CRD’s website here.

The reports for 2022 were due on May 10, 2023, and are due annually going forward on the second Wednesday of May.  

If an employer fails to file these pay data reports, the CRD can seek a court order requiring compliance and recovery of their associated costs. A court also can impose civil penalties of $100-200 per employee for subsequent failures to file the report.

Action Items

In order to make sure you’re complying with these requirements, you can:

• Ensure that all of your job postings include the required pay scale information, and confirm that any third parties you’re working with are doing the same.
• Confirm that your records maintenance policies and practices comply with the law’s record-keeping requirements.
• Conduct a pay audit of your workforce. Determine the salary ranges for existing positions, and make pay adjustments or title adjustments to correct any discrepancies.
• If the pay data reporting requirements are applicable to your company, compile the requisite data and assign someone to ensure you’re making the correct fillings on time.
• For companies with multi-state operations, determine whether there are similar pay disclosure laws in your other locations (e.g. Colorado, Washington, New York City) and make sure you’re compliant with those as well. 

FAQs

Q: How do I handle pay transparency laws if I am hiring in different states? 

• A: Pay transparency laws are currently governed on a state-by-state basis. This creates a patchwork system in which it can be difficult to keep track of (and remain compliant with) different laws. So, if you’re hiring in any states that are currently mandating pay transparency action, it’s best to adopt a consistent, company-wide approach that complies with the most restrictive state laws you’re subject to. 

Q: What if the job I’m hiring for can be filled by candidates at different levels? 

• A: When mapping out a role, you may find that several different levels could be a good fit for a position. For example, if you are looking for a “senior” Frontend engineer, that could imply someone at a senior or principal level. Instead of writing your pay scale as one wide range on one job description, it’s best practice to break it down into two different job descriptions, each tied to a different level and its own more narrow pay scale. 

Q: Can you hire someone outside of the range you’ve listed in your posting? 

A: When an employer posts a job, they should list the reasonable range that they are willing to pay in good faith. If you end up finding a candidate who needs to be paid outside of the listed range, and you make the decision to do so, you need to be ready to justify this decision. 

• In general, best practice is to do upfront work to determine fair and enticing pay scales at the outset, so you can get the best talent without having to pay above your listed range. 
• Signing bonuses can be a powerful tool. Although it’s not generally recommended to give outrageous signing bonuses, a small extra bonus to attract a critical hire is an option. If you find that you consistently need to offer signing bonuses in order to close candidates, you likely need to increase the pay scale for that role and level. 

Disclaimer: The content provided in the Amplify Legal Hub is intended for informational purposes only and should not be construed as legal advice. Always consult a qualified legal professional for advice tailored to your specific situation.