California “Pay Transparency for Pay Equity Act” Addresses Pay Gaps (SB 1162)
On September 27, 2022, Governor Gavin Newsom signed into law Senate Bill 1162, also known as the Pay Transparency for Pay Equity Act, to tackle discriminatory pay gaps in the workforce. California will now be the largest state where job applicant pay information will be mandated by law. Employers, including unions, trust funds, and other labor organizations acting in the role of employer, should ensure they are in compliance when the law goes into effect on January 1, 2023.
Reporting requirement: In May of each year, private employers with 100 or more employees must submit a report to the California Civil Rights Department with pay data for the prior calendar year. The report must include median and mean hourly rates within each listed job category, by race, ethnicity, and gender. A labor contractor, such as a staffing agency, is also responsible for submitting this pay data in a separate pay data report that it must provide to the private employer using it. The separate pay data report must also report the ownership names of the labor contractors.
Job posting requirement: Employers with 15 or more employees must disclose the pay scale for job openings in job postings, and provide the pay scale to current employees upon request. Employers cannot circumvent this requirement by posting job openings through third parties. The employer must provide the pay scale to the third party for publication.
Wage recordkeeping requirement: Employers must maintain a record of each employee’s job title and wage history during employment and for three years after the end of employment. The records must be open to inspection by the Labor Commissioner. If the employer fails to maintain records, the Labor Commissioner will apply a rebuttable presumption in favor of the employee’s claim.
Enforcement: First, the state can impose a fine on employers that fail to comply with reporting requirements. Failure to file the required reports could result in penalties of $100 per employee for an initial violation, and up to $200 per employee for any subsequent violation. Second, the law creates a private right of action. An employee or applicant who claims to be impacted by a violation of the law can also bring a civil action in court. Third, an aggrieved employee or applicant can file a claim with the Labor Commissioner, which could result in a $10,000 fine.
In conclusion, SB 1162 creates new worker protections that could also play a role as an important tool in organizing and representing union members. In addition, unions and trust funds as employers will need to comply with SB 1162 in California. This includes reporting pay data to the state every year in May, including pay scales in job postings, providing pay scales to current employees upon request, and maintaining job title and wage history records for at least three years.
For more information, please contact your labor law counsel.