By Adam Nathaniel Arce
The California State Senate passed Senate Bill 1162 (“SB 1162”), which modifies the CA Government Code and the CA Labor Code to create new requirements for Employers (large and small) to report, maintain, and/or post information relating to an employee’s pay and pay scales.
Pay Data Reporting – Employers with 100 or more employees
Government Code Section 12999 already requires private employers with 100 or more employees to file an annual pay data report with the Department of Fair Employment and Housing by the end of March each year. SB 1162 now amends this code section to require private employers with 100 or more employees to submit a pay data report directly to the Civil Rights Department (formerly the Department of Fair Employment and Housing) on or before the second Wednesday of May 2023, and every year thereafter. This report must cover the “Reporting Year,” which is defined by Government Code Section 12999 as the prior calendar year.
Each report is required to contain: 1) The number of employees by race, ethnicity, and sex for specified job categories1; 2) 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 of Labor Statistics in the Occupational Employment Statistics survey; 3) Within each job category, for each combination of race, ethnicity, and sex, the median and mean hourly rate; 4) A snapshot that counts all of the individuals in each job category by race, ethnicity, and sex, employed during a single pay period of the employer’s choice between October 1 and December 31 of the Reporting Year; 5) The total earnings, as shown on the Internal Revenue Service Form W-2, for each employee in the snapshot, for the entire Reporting Year, regardless of whether or not an employee worked for the full calendar year (Employers are required to tabulate and report the number of employees whose W-2 earnings during the Reporting Year fell within each pay band); 6) The total number of hours worked by each employee counted in each pay band during the Reporting Year; and, 7). The employer’s North American Industry Classification System (“NAICS”) code.
In addition to the above, the report must also include a section for an employer to make clarifying remarks (though an employer is not required to submit clarifying remarks). An employer with multiple establishments must submit a report for each establishment. SB 1162 further requires that these pay data reports include the median and mean hourly rate for each combination of race, ethnicity, and sex within each job category.
Moreover, this update to Government Code Section 12999 requires private employers that have 100 or more employees hired through labor contractors to also submit a separate pay data report to the Civil Rights Department for those employees in accordance with the above timeframe.
1 Specified job categories under Government Code Section 12999(b) are: (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; and (J) Service workers.
Finally, SB 1162 expressly removes an employer’s ability to submit a consolidated report covering multiple establishments and removes an employer’s ability to submit an annual employer Information Report pursuant to Federal Law, in lieu of a pay data report.
Employers with 100 or more employees should review their existing reporting procedures to ensure that all information now required by Government Code Section 12999 is gathered and included in the report in time for the annual report due on the Second Wednesday of May 2023.
Pay Scale in Job Postings – Employers with 15 or more Employees
SB 1162 also makes changes to Labor Code Section 432.3, which concerns employer recordkeeping of wage and salary records. SB 1162 amends Labor Code Section 432.3 to require employers with 15 or more employees to include pay scale information (defined as “the salary or hourly wage range that the employer reasonably expects to pay for the position”) in the job posting for any position (such as job advertisements/postings on Monster, Indeed, Craigslist, etc.) The same requirements apply even if an employer utilizes a third-party to generate and post these job postings.
SB 1182 further establishes a civil penalty for violation of Labor Code Section 432.3, addressed below. Employers should ensure that any exiting job postings and all future job postings include the pay scale information now required under Labor Code Section 432.3
Pay Scale Requests – All Employers
While Labor Code Section 432.3 already required employers to provide pay scale information upon request by an employee, SB 1162 further requires that an employer maintain records of a job title and wage rate history for each employee “for the duration of employment plus three years after the end of employment.”
Moreover, if an employer does not keep records in accordance with Labor Code section 432.3, the statute creates a rebuttable presumption in favor of the employee’s claim that the employer violated this Labor Code Section. To that end, it is important to implement proper record keeping procedures if your business has not done so already to avoid any penalties.
Civil Penalties
For violations of the pay data reporting requirement, a Court is permitted to impose a civil penalty not to exceed $100 per employee for the initial failure to file the report, and a penalty of $200 per employee for each subsequent failure to file the report, to be paid to the Civil Rights Department’s Enforcement and Litigation fund.
For violations of the Pay Scale requirements, the CA Labor Commissioner may order an Employer to pay a civil penalty of between $100 – $10,000 per violation. The amount of this penalty is based, in part, on any prior violation of this statute. The Labor Commissioner will not require an Employer to pay a penalty for the first violation “upon demonstration by the employer that all job postings for open positions have been updated to include the pay scale as required by this section.”
Conclusion
Employers should ensure that they are maintaining records and reporting information as required by SB 1162. Ferber Law is available to assist employers to take proactive steps in order to comply with SB 1162.
DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.