On September 27, 2022, Governor Newsom signed the Pay Transparency for Pay Equity Act into law. SB 1162 is the latest in a series of laws passed in Colorado, Washington, and New York City that mandates pay transparency in an effort to combat gender and race-related pay disparities.
Pay Transparency for Pay Equity Act
Effective January 1, 2023, employers with 15 or more employees are required to include in their job ads the position’s “pay scale,” defined as “the salary or hourly wage range that the employer reasonably expects to pay for the position.” The law also applies to companies based outside of California as long as they have 15 or more employees and at least one of them works in California.
Effective January 1, 2023, all California employers regardless of size must also disclose to current employees upon request the pay scale for the position in which the employee is currently employed.
Employees Hired Through a Labor Contractor
Additionally, the law includes expanded reporting requirements for employers with 100 or more workers employed through a labor contractor. A “labor contractor” is defined as “an individual or entity that supplies, either with or without a contract, a client employer with workers to perform labor within the client employer’s usual course of business,” which refers to employees hired through staffing agencies, not independent contractors. Employers who have 100 or more of these workers must submit their wage data to the California Civil Rights Department, broken down by sex, race, and ethnicity. California employers with 100 or more employees are already required to report pay data for their direct hires and this new law is an expansion of that requirement. This new reporting requirement will apply broadly to employers around the country as long as they have at least one employee physically working in California.
Next Steps
Employers are required to submit this information to the Civil Rights Department on or before the second Wednesday of May 2023 and every year thereafter. The new law requires employers to submit separate pay data reports for direct hires and employees hired through a labor contractor.
In preparation for the implementation of SB 1162, employers should begin reviewing their current salary scales to ensure there are no unintended pay disparities in place before hiring begins in 2023.
