California's Pay Transparency Law

Alert: California’s Pay Transparency law (S.B.1162), goes into effect on January 1, 2023, impacting any company with at least one California employee.


Why it matters: Because now is the time to prepare and avoid any penalties.


The high-level summary: Employers must disclose pay rates to applicants and employees, and report pay data to the Department of Fair Employment and Housing (“DFEH”).


  • Employers with 15 or more employees are now required to:

- Disclose pay scale data (e.g., hourly rate or salary range) in all job postings and also upon request for the position in which an employee is currently employed.

- Provide that information to third parties who post those jobs (e.g. LinkedIn or Indeed).

- Maintain records of job title and wage rate history for all employees for the duration of employment plus three years.

  • In addition, employers with 100 or more employees must also:

- Report the median and mean hourly rate of pay for each combination of race, ethnicity, and sex within each job category (see footnote below) to the Civil Rights Department (CRD).

- Produce reports by May 10, 2023, and by the second Wednesday of May thereafter.

- Provide a separate report for any contracted employees with data required to be provided by the labor contractor.

- Include reporting number of employees by race, ethnicity, and sex within distinct categories as well as the number of employees by race, ethnicity, and sex whose annual earnings fall within each of the pay bands used by the United States Bureau in the Occupational Employment Statistics Survey.


8 steps to prepare and comply


1. Develop a compensation philosophy covering the four pillars of total rewards (base, bonus, equity, and benefits).


2. Update job-posting practices to ensure the Talent Acquisitions Team and Managers understand the law, are leveraging the latest job descriptions, and disclose salary scale.


3. Clean your HRIS data to ensure records regarding education, training, certification, skills, sex, race, ethnicity, and any other relevant information are current and accurate.


4. Conduct a job evaluation review to benchmark your roles and levels and ensure you are categorizing appropriately.


5. Review your employee pay levels for potential pay disparities and determine if appropriate.


6. Finalize your pay ranges for all roles and jobs in California.


7. Document and define geographic pay tiers.


8. For employers with 100 or more employees:

  • Investigate leveling to the S.B.1162 job categories and within the pay bands of BLS Occupational Employment Statistics survey.

  • Prepare reporting templates and track down information needed.



 

(A) Executive or senior level officials and managers., (B) First or mid-level officials and managers., (C) Professionals., (D) Technicians., (E) Sales workers., (F) Administrative support workers., (G) Craft workers., (H) Operatives., (I) Laborers and helpers., (J) Service workers.