In September of 2022, California Governor Gavin Newsom signed into law Senate Bill 1162, also known as SB 1162, the Pay Transparency Act, which went into effect on January 1 of this year. This new pay transparency law adds new requirements for payroll, hiring, and recruiting in the state of California.
SB 1162 sets new expectations for businesses operating and hiring in the state of California regarding pay scale and pay data reporting, making adherence to the new requirements especially important for payroll, hiring, and recruiting. This new development highlights the ever-changing nature of the landscape of California employment law and the importance of having HR support specialists who focus on these California requirements on your side.
How California Expands Pay Transparency Requirements
In an earlier blog post, we looked into the key points from SB 1162, namely its new requirements for pay scale and pay data reporting. For hiring and recruiting personnel, the former is most pertinent, while the latter is more critical for payroll personnel and managers. Together, SB 1162 is a critically important law for HR personnel to understand for any company that operates in and hires from the state of California.
Let’s take a look at some frequently asked questions about the new California salary transparency law for hiring and recruiting personnel and delve deeper into its purpose, requirements, and how to best ensure compliance.
What is SB 1162?
SB 1162 builds upon existing employment legislation intended to ensure that workers receive fair and equal pay in the work they do through California’s Pay Data Reporting (PDR) system. Established by legislation in 2020, the PDR system requires employers with 100 or more employees to submit annual reports to the California Department of Fair Employment and Housing to help employers identify and address potential wage disparities based on race, ethnicity, sex, and other protected characteristics.
California’s Pay Transparency Act (SB 1162) is a new law that requires employers with 15 or more employees to include a pay scale for job postings, including internal and external postings and job postings through third parties. In addition, SB 1162 also establishes new annual pay data reporting requirements for employers with 100 or more employees.
One of the new obligations SB 1162 creates for businesses is the obligation to report data not only for their W-2 employees but for workers supplied by labor contractors as well.
In building upon California’s existing wage and employment equity legislation, SB 1162 also requires certain employers to provide pay scales on job postings. While the majority of the new requirements of the Pay Transparency Act are enforced by the state of California Civil Rights Department (CRD), this requirement for pay scales on job postings is enforced by the Division of Labor Standards Enforcement or the Department of Industrial Relations.
How does SB 1162 protect consumer privacy?
As SB 1162 involves the collection of payroll data from a wide range of large businesses, including data for W-2 employees and workers supplied by labor contractors, by the California state government, the privacy of company data is taken extremely seriously.
The California Civil Rights Department uses end-to-end encryption to transmit and store all employer-submitted payroll data in a secure government cloud that meets all FedRAMP and NIST federal and state requirements for data protection. No employer’s pay data will be publicly available except under very specific circumstances, and any and all “individually identifiable information” submitted is considered confidential information.
When does the California pay transparency law go into effect?
The new California pay transparency law established by SB 1162 went into effect on January 1, 2023, widening the criteria for companies that must comply with California pay transparency legislation and establishing new obligations for companies of a certain size to disclose pay ranges in job postings.
The deadline for employers to submit their annual pay data reports is the second Wednesday of May of the following year. The deadline to submit pay data reports for 2022 was May 10, 2023. This is a change from the previous reporting deadline of March 31, giving employers some welcome extra time to prepare their data reports to meet their new legal standards and obligations.
The California Civil Rights Department provides further information on filing deadlines, procedures, certification, and compliance on its website’s PDR FAQ, which has been updated since the passage of SB 1162.
Pay Scale Transparency Compliance with SB 1162 for Recruiting and Hiring Personnel
SB 1162 requires the disclosure of pay scales in job openings for all positions, internal and external, with “pay scale” defined as the salary or hourly wage the employer reasonably expects to pay for a position. The pay scale does not need to include bonuses, commissions, tips, or other benefits.
This new pay transparency requirement for businesses with 15 or more employees extends not just to job postings on a company website but to third-party platforms such as LinkedIn or Indeed as well.
For remote work positions, the pay scale must be included on all job postings if the position may ever be filled remotely or in person by a California resident. The pay scale must be included on the posting itself as well, not through a link or QR code in an electronic or paper posting.
In addition, employers of any size—not just employers with 15 or more employees—must be able to provide any worker in their employ with the pay scale for their position upon request.
Failure to comply with the new requirements of SB 1162, whether for annual PDR or for pay scale transparency, can result in significant civil penalties. The civil penalty for pay scale transparency violations is no less than $100 and no more than $10,000 per violation of the pay scale disclosure requirement.
Let California Payroll Services help simplify the confusing landscape of California pay data reporting for you.
Our focus is on staying up-to-date with the latest labor and employment laws in the state. We want to make sure our clients fully understand what they need to know about their reporting obligations in the Golden State.
If you need help staying compliant with reporting standards and obligations for California pay transparency law SB 1162, reach out to us today about how we can assist you.
Who is required to comply with California's pay transparency law?
Employers with 15 or more employees are required to comply with California’s pay transparency law, which includes disclosing a pay scale for job postings and providing certain pay data reports.
What is a pay scale under California's pay transparency law?
A pay scale is defined as the salary or hourly wage the employer reasonably expects to pay for a position. The pay scale does not have to include bonuses, commissions, tips, or other benefits.
When is the deadline for annual pay data reports under California's pay transparency law?
The deadline for employers to submit their annual pay data reports is the second Wednesday of May of the following year. For example, the deadline to submit pay data reports for 2022 was May 10, 2023.
What are the penalties for noncompliance with California's pay transparency law?
Failure to comply with the new requirements of California’s pay transparency law can result in significant civil penalties. The civil penalty for pay scale transparency violations is no less than $100 and no more than $10,000 per violation of the pay scale disclosure requirement.