California is adopting SB 1162. It’s been signed, sealed and delivered. We are just waiting for it to take effect in January 2023, with reports due for some organizations by May 2023. That makes now the ideal time to learn about your company’s requirements under SB1162 to begin preparing for compliance. What does the bill do? In a nutshell, it’s a collection of employee & transparency friendly policies. The requirements only kick in when your company is a certain size, so we will organize the requirements by company size.
All Companies
The first change this law makes is to create a new California employment agency. It will be called the “Division of Labor Standards Enforcement”, and fall under the Labor Commissioner, which falls under the California Department of Industrial Relations. What will the Division of Labor Standards Enforcement focus on? This will likely be added to over time, but to start, they will ensure that existing law is followed when it comes to job applicants being provided pay scales for positions upon request. (Pay scales are defined as ‘salary or hourly wage range.’)
It will also add a new requirement that current employees, not just applicants, can request the pay scale for the position in which the employee is currently employed.
This obviously changes the old way of doing things, where only very few in the organization knew the actual pay. The idea behind this is that it would provide a way free of retaliation (that is the spirit of the law, though, knowing human beings are prone to breaking employment law… it may spur incidents of retaliation) for current and prospective employees to know what the going rate for their position of interest is within that organization. The idea is that it would help ensure that people are being paid fairly, rather than having huge disparities in pay for the same position.
Companies with 15 or more employees
This might likely be one of the more consequential new requirements of the bill. Every company with 15 or more employees will need to include the payscale for the position in their job postings. To back this up, companies would be responsible for keeping data down to job title level and individual (anonymized) person level with pay information. Failure to keep or provide this information is an offense, of which there is a presumption of favor for the complainant. The bill allows the Division of Labor Standards Enforcement to investigate claims from any employee or applicant for postings that do not provide pay scale (or the requested report) and can provide authorization or blessings for that person to pursue the employer in a civil action. It would authorize that a private person be able to pursue injunctive and other reliefs.
Companies with 100 or more employees
Companies larger than a certain size will have to keep and provide great records. By May of each year, a full pay scale report on all employees will need to be sent to the new Division of Labor Standards Enforcement. It also requires data on personnel hired through labor contractors. The bill lays out a $100 fine per employee if a company fails to file, and then $200 for subsequent years the employer doesn’t file. This new report, EEO-1 has other details. If your company is over 100 employees and you need guidance to be compliant, please contact our law offices.
Employee Pay Transparency as a Trend
While some may react to new regulations as catastrophic, most likely your company has survived to 15+ or 100+ employees by having competitive pay anyway. This could end up being a recruiting tool. The reporting is unavoidably a new compliance burden; however, it helps to understand that this is part of a growing international trend, that has gained a foothold in the United States already. California is not alone in this. There are existing laws that put into effect more or less similar requirements in New York City, Colorado, Washington, and a handful of smaller areas of economic power. Soon, it is likely New York State will adopt it, and experts expect this trend to continue across other states. Proponents hope it will help contribute to a fair playing field for employees and the reduction of the likelihood of intentional or accidental pay discrimination.