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What California’s pay transparency regulation might imply for you


California Gov. Gavin Newsom has signed a brand new pay transparency act that can require important modifications in how employers draft job postings and the way they report pay knowledge to the state. Given the scope of the modifications, many employers ought to start getting ready now.

These are a number of of probably the most important provisions of the regulation, which may develop into a mannequin for different states in search of to reinforce pay transparency:

Job postings should embrace wage ranges

Beginning Jan. 1, 2023, California employers with 15 or extra workers should embrace a place’s wage or hourly wage vary (not together with bonuses or equity-based compensation) in any inner or exterior job posting. This requirement extends to job postings printed by a 3rd get together at an employer’s request.

Enlargement of pay scale disclosures upon request

Below present California regulation, after an exterior applicant has accomplished an preliminary interview for a place, an employer should present the place’s wage or hourly wage vary upon the applicant’s cheap request.

Holly Sutton, Farella Braun + Martel
Co-author Holly Sutton of Farella Braun + Martel

Beginning in January, SB 1162 expands this requirement to cowl present workers who request the pay scale for the place through which they’re at present employed, in addition to any exterior candidates in search of employment with the employer who make such a request. The brand new requirement to share wage vary data with present workers and candidates applies to all employers in California, together with these with fewer than 15 workers.

SB 1162 additionally establishes a civil penalty of as much as $10,000 per violation of its pay scale disclosure and job posting necessities. Nonetheless, there isn’t any penalty for a primary violation of the job posting requirement if the employer can present that each one job postings for open positions have been up to date to incorporate the pay scale.

Enlargement of pay knowledge reporting necessities

Just like federal pay knowledge reporting necessities, present regulation in California requires employers with 100 or extra workers to yearly report pay knowledge on every of 10 specified job classes to the California Division of Truthful Employment and Housing (DFEH). This report is calculated from a “snapshot” of a single pay interval of the employer’s alternative between Oct. 1 and Dec. 31.

Starting in Might 2023, SB 1162 expands these DFEH reporting necessities. For every job class, employers should embrace the median and imply hourly price, damaged down by race, ethnicity and intercourse. It is a materials change from present regulation, which solely requires numerical counts of workers by race, ethnicity and intercourse inside every job class’s pay band. As well as, SB 1162 removes a logistical burden by eliminating the requirement that employers with a number of institutions present each a consolidated report of all institutions and a separate report for every institution. As an alternative, employers want solely present a report for every institution.

Hillary Marks, Farella Braun + Martel
Co-author Hillary Marks of Farella Braun + Martel

Employers who’ve retained at the least 100 people by labor contractors the prior calendar 12 months (e.g. beginning in 2022) should produce the pay knowledge outlined above for these people in the event that they have been performing labor inside the employer’s common course of enterprise. This new requirement will spotlight the pay variations between workers and contractors retained by third events. As with workers, this pay knowledge should be supplied by the second Wednesday of Might every year.

Legal responsibility threat

If there are variations between protected classes of workers inside the similar job class, this new reporting requirement may result in claims of discrimination or equal pay violations. The pay knowledge stories are usually not publicly reported presently attributable to a late modification to the invoice, which initially would have required the state to publish the stories on a public web site. Nonetheless, it’s seemingly that such stories could be out there by way of a FOIA request or by civil discovery.

SB 1162 additionally establishes a civil penalty of as much as $100 per worker for an employer that fails to report and a civil penalty of as much as $200 per worker for a subsequent reporting violation.

Reminder on different present pay transparency necessities

Current California regulation prohibits employers from asking job candidates for “wage historical past data.” Nonetheless, employers might ask about an applicant’s “wage expectation” for the place. As well as, employers are usually not prohibited from making a compensation resolution primarily based on a present worker’s present wage (or an applicant’s wage if they’ve voluntarily disclosed it), as long as any wage differential ensuing from that compensation resolution is justified by one of many Equal Pay Act elements: seniority or benefit system, manufacturing system or a bona fide issue similar to schooling, coaching or expertise.

Pay transparency and knowledge reporting legal guidelines in different jurisdictions

Employers working outdoors of California must also affirm pay transparency and pay knowledge reporting necessities in different jurisdictions. Proper now, Colorado state and Jersey Metropolis are the one jurisdictions that require sure employers to offer wage ranges in job postings. Nonetheless, Washington state and three New York localities (Ithaca Metropolis, New York Metropolis and Westchester County) have handed related legal guidelines, scheduled to enter impact inside the subsequent few months. New York state additionally has accepted laws that, pending the governor’s signature, would require any employers with at the least 4 workers to incorporate the wage ranges and job descriptions (in the event that they exist) of their commercials for a job, promotion or switch alternative. Different jurisdictions have pay transparency legal guidelines requiring employers to offer wage ranges at an applicant’s request and/or have obligatory disclosure necessities at different factors within the hiring/employment course of. Every jurisdiction has taken its personal strategy and has barely completely different necessities.

Along with federal and California pay knowledge reporting necessities, Illinois handed a pay knowledge assortment final 12 months, requiring employers with 100 or extra workers to report pay knowledge to the state and procure an equal pay registration certificates. We’re more likely to see extra states and jurisdictions cross related pay knowledge reporting legal guidelines within the coming years.

What you need to do

We count on this pattern will proceed to broaden to different states. Employers are inspired to seek the advice of with employment counsel on their job listings and may develop pay bands for every function prematurely of posting the function. To arrange for brand new job posting necessities, employers ought to develop a course of for persistently publishing wage vary data in inner and exterior job postings, in addition to a course of for preserving such publications to show compliance. Relatedly, employers ought to prepare managers, recruiters and human sources professionals on these processes and the brand new regulation’s necessities.

To arrange for expanded public reporting in 2023, employers may take into account an inner audit of present worker wages to make sure there are usually not any important discrepancies or inequities. Even when pay reporting isn’t at present mandated on your employer’s jurisdiction or dimension, an audit will assist put together for potential pay fairness reporting which may be required sooner or later.

Given the rising variety of states and localities requiring wage transparency, multistate employers might take into account a nationwide coverage for together with wage ranges in job postings and/or offering wage ranges to candidates.




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