California Legislature Passes Pay Transparency Act

If signed into law by Governor Newsom prior to the September 30, 2022 deadline, the act will significantly impact how employers draft employment postings and report pay data to the state.

Pending signature, California's Pay Transparency Act (SB 1162) will go into effect January 1, 2023 and is applicable to all employers who employ 15 or more individuals. The bill will require that both internally and externally posted positions must be accompanied by a salary or wage range (exclusive of bonuses or other equity-based compensation.) Third parties that publish job postings on behalf of employers are also beholden to the terms of the bill. Furthermore, because SB 1162 is not expressly limited to employers with operations or staff in California, the law could impact employers without a physical office or current employees in the state. As such, organizations that publish nationwide postings for remote positions could be impacted.

Currently, California law requires an employer to disclose salary/wage information upon an applicant's reasonable request and after an initial interview has been conducted. If passed, SB1162 would expand this requirement to include current employees requesting pay scale data for the position the individual currently holds and any inquiring candidate, regardless of whether an interview has been conducted. Honoring requests about pay data from both current employees and applicants applies to all employers, even those maintaining less than 15 employees.

California law also currently requires that organizations employing 100 individuals or more report pay data pertaining to 10 specific job categories to the California Department of Fair Employment and Housing (DFEH). These reporting requirements would be expanded under SB 1162 to include the median and mean hourly rate, delineated by race, ethnicity and sex for each job category and would also be applicable to individuals hired via labor contractors. If signed, these terms of the bill would go into effect starting May 1, 2023.

It is important to note that current California law prohibits employers from asking job applicants for "salary history information;" however, questions about "salary expectations" may be posed. Employers are permitted to make compensation decisions based on existing salary or the applicant's salary (if disclosed by the individual) providing any wage differential is justified by one of the Equal Pay Act factors:

  • Seniority or merit system
  • Production system
  • Bona fide factor such as education, training, or experience

Posted: September 14, 2022

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