California Draft Bill Doubles Down on Pay Transparency

On Feb. 17, the California Senate introduced SB 1162. The draft California law enhances two common state law pay transparency strategies: proactive wage range disclosure and pay data reporting.

Proactive Wage Range Disclosure

California was the first state in the nation to pass a mandatory pay transparency statue. It requires California employers to provide external applicants the "pay scale" for a job they are applying to "upon reasonable request." At the time, this was cutting edge. Since then, state after state have passed their own pay transparency requirements. Even some cities have joined in. Some new pay transparency laws require disclosure to applicants. Others require disclosure to employees. Some require disclosure upon request. Others require disclosure proactively.

Colorado's pay transparency law is currently the most aggressive. It requires employers include pay and benefits disclosures in job postings—including for remote roles. It also requires written notice to Colorado employees before it decides to hire, change the job title, or change the job duties, authorities, or opportunities of any employee.

In short, California's draft law largely mirrors Colorado's approach. Like Colorado, it would require pay scales to be included in each job posting. It is unclear if California intends this law to reach jobs beyond its state boundary like Colorado.

And like Colorado, the California law would require "[a]n employer [to] announce, post, publish, or otherwise make known any opportunity for promotion … to all current employees on the same calendar day and prior to making a promotion decision." But California goes farther. The bill expressly requires that these promotional notices include the pay scale for the position. Colorado created this requirement through rule making and sub-regulatory guidance.

Pay Data Reporting

In September 2020, California passed the nation's first state-level pay data reporting obligation. That law requires employers with 100 or more employees to provide the number of employees by race, ethnicity, and sex in each of the 10 EEO-1 Job Categories (following the EEO-1 Instruction Booklet) and within each of the "pay bands" used by the U.S. Bureau of Labor Statistics Occupational Employment Statistics classifications. Employers submitted their first reports in March 2021.

But SB 1162 proposes a few key changes to this still-new requirement. For example, it would:

Expand the pay data reporting obligation to include "employees hired through" a third-party that supplies workers to perform labor within the reporting employer's usual course of business—and disclose the "ownership names of all labor contractors used to supply employees."

• Impose a monetary penalty for not filing the report the first time of more than $100 per employee, and of not more than $200 per employee for any subsequent failure to file the report.
• Require employers to disclose the specific median (middle) and average hourly rate of pay for employees within each job category, race, ethnicity, and sex combination (to top of the current disclosures).
• Require the state "publish each private employer's pay data report … on an internet website available to the public" but not any individually identifiable information that is associated with a specific person.
• Shift the due date to the "second Wednesday of May" beginning in 2023.

To be clear, this bill was just introduced and has a long journey to become law. But it's certainly one California employers will want to watch. We certainly will be.

Christopher T. Patrick is an attorney with Jackson Lewis in Denver. Jacklin Rad is an attorney with Jackson Lewis in Los Angeles.