California Passes Public Pay Disclosure Reporting Requirements for Employers Hiring Contract Workers
As we predicted in our prior post (here), California passed new pay transparency legislation requiring employers to report contractor compensation data and list employee pay ranges (salary or hourly rates of pay) on job postings. Effective January 1, 2023, Senate Bill 1162, known as the Pay Transparency for Pay Equity Act, mandates that employers submit pay data reports to the California Civil Rights Department revealing compensation paid to contractors broken down by gender, race, and ethnicity. Following Colorado, Washington, and New York City, California employers with 15 or more workers also must disclose salary ranges on all job advertisements, whether posted by the employer or a third party. Employers of any size must provide existing employees with the salary range for their positions if requested.
California already requires employers with 100 or more employees to submit reports detailing pay by sex, race, ethnicity, and job category, but those reports are confidential and not subject to a Public Records Act request. The new legislation, co-sponsored by the California Employment Lawyers Association, does not provide the protection of confidentiality but permits public dissemination of the data, although the Civil Rights Department states that published aggregate reports will not identify specific companies and pay data reports will not be publicized. A broad group of organizations opposed the legislation, including the California Chamber of Commerce, the American Staffing Association, the California Grocers Association, the California Bankers Association, the California Farm Bureau, and the California Restaurant Association, citing concerns for increased litigation and the possible imposition of penalties under the Private Attorneys General Act, increased obstacles to hiring, and burdensome administrative and record keeping requirements.
Employers should take note of the following:
The law is unclear as to how it applies to remote workers. Employers who do not have physical locations or employees in California may need to comply with the requirements if they publish nationwide job postings for remote positions.
The new law requires employers to provide pay ranges for the positions held by current California employees upon request, extending the previous requirement that employers provide pay ranges to applicants who had completed an initial interview.
Starting in 2023, the annual pay reports for employers with over 100 employees must include the median and mean hourly rate of pay, broken down by race, ethnicity, and sex. Previously, employers only needed to provide the number of employees by category in each job category’s pay band.
Employers must provide this same data for individuals hired through labor contractors (i.e., temporary staffing agencies) who supply workers to perform work within the employer’s usual course of business. The information must include the “ownership names of all labor contractors used to supply employees.”
Employers must submit their first reports under this new law by May 10, 2023.