California Releases Guidance on Pay Transparency Law

​On Jan. 1, California's new pay transparency law requiring pay scales in job openings went into effect.  Although Senate Bill 1162 was passed in September, many employers were left to wonder how the California Labor Commissioner would interpret a few key elements of the law.

Senate Bill 1162 instituted major changes to the annual pay data report and requires employers with 15 or more employees to post a pay scale in any open job advertisement.

Although the state Civil Rights Department has not yet issued guidance on the new annual pay data requirements, the Labor Commissioner's Office has updated its Frequently Asked Questions on a few key elements of this law.

Employee Threshold

Newly revised Labor Code section 432.3 applies to employers with 15 or more employees. The statute does not specify how to count the employees for purposes of coverage, but the Labor Commissioner has issued guidance stating that the calculation of the 15-employee threshold is to be consistent with how an employer counts employees for the purposes of 2022 COVID-19 Supplemental Paid Sick Leave (SPSL) and phase-in for the new minimum wage rates.

For purposes of calculating whether the new 2023 minimum wage applies, an employer is covered if it has 26 or more employees. The guidance issued on that topic states: "The Labor Commissioner recommends that if an employer reaches the threshold of 26 employees at any point in a pay period, they compensate their workers at the minimum higher wage rate for the duration of the entire pay period and going forward as long as they have a minimum of 26 employees."

For pay transparency compliance, the Labor Commissioner interprets the 15-employee threshold to apply when: 1) an employer reaches 15 employees at any point in a pay period, and 2) at least one employee is currently located in California. If an employer has more than one facility, all employees are counted, as well as out-of-state employees for purposes of making this calculation. 

Remote Workers

Previously, employers were unsure whether the pay transparency law affected nationwide job postings, if the opening could be filled by someone in California. The Labor Commissioner has clarified that the pay scale must be included in the job posting if the position may ever be filled in California, either in-person or remotely.  For multistate or fully remote employers, this may change their approach to compliance with California's pay transparency law.

Definition of Pay Scale

Pay scale is defined as the salary or hourly wage range that the employer reasonably expects to pay for the position. The Labor Commissioner has clarified that pay scale does not include bonuses, commissions, tips, or other benefits. However, if the position's hourly or salary wage is based on a piece rate or commission, then the piece rate or commission range the employer reasonably expects to pay for the position must be included in the job posting.

When disclosing pay scales, an employer must include the pay scale in the job posting itself.  No links to the pay scale are permitted, nor are QR codes allowed as a substitute for placing the wage information in the actual posting.

Legal Violations

A person has one year to file a written complaint with the Labor Commissioner from the date they learned of the violation (not when the violation may have occurred.) According to the Labor Commissioner's guidance, an employee may file a claim of retaliation with the Labor Commissioner within one year of any retaliation.

As an alternative, an employee may file a civil action for retaliation in court within one year of the retaliation. Under the Labor Code, an employee who prevails in a retaliation claim may be awarded reinstatement, back pay, interest on back pay, and possibly other remedies. An employee does not have to file a retaliation claim with the Labor Commissioner before filing an action in court.  This is in addition to the civil penalties the Labor Commissioner is permitted to assess for violations of this law ($100 to $10,000.)

Joy C. Rosenquist is an attorney with Littler in Sacramento, Calif. Denise M. Visconti is an attorney with Littler in San Diego. ©2022. All rights reserved. Reprinted with permission.