Every so often, a “tsunami” law comes crashing in. SB 1162, the new California pay transparency law, is sweeping in with substantial changes to the employment landscape. So significant, that employers who have just one employee need to comply with at least part of the new requirements.

Poised to pinpoint patterns of wage discrimination, California SB 1162 may be seen as going further than any pay equity-related bill ever has. Employers with at least 15 employees must disclose pay ranges in their job postings. Employers with 100 or more employees and/or 100 labor contractors must also provide pay data reporting submissions annually.  These requirements come with hefty penalties for violations.   

Now, questions are bubbling up–and you might have a few yourself. We’ve included the most frequently asked ones here, in hopes of helping employers as you stay out of high water.

California SB 1162 FAQs

When does California SB 1162 take effect?

California’s SB 1162 was signed into law on September 27, 2022. It takes effect on January 1, 2023. 

The requirement for employers to affirmatively disclose pay ranges in job postings goes into effect on January 1, 2023.

Employers with 15 or more employees must affirmatively disclose the pay ranges for job positions. This includes job listings through third-party staffing agencies.

In addition, if any employee requests to see the pay scale for their current position, the employer must disclose it.

You will need to keep records of each employee’s title and wage history. These records must be maintained for the entire period of employment, and be stored for three years after their employment ends. 

But employers have until May 10, 2023, to submit their first pay data reports. After that, they must send pay data reports each year, on the second Wednesday of May.  Separate reports for employees and for labor contractors are required if the thresholds are met, which are at least 100 employees and at least 100 labor contractors.

What changes does California law SB 1162 make to current pay data reporting requirements? 

The main pay data reporting changes are as follows:

  • In addition to the reporting for employees if an employer has at least 100 employees, an employer must also submit a separate report if there are at least 100 labor contractors 
  • The reports must identify the mean and median pay data for combinations of gender and race/ethnicity
  • The reports must be submitted even if not required to send EEO-1 reports to the Equal Employment Opportunity Commision
  • Failing to report can result in civil penalties of up to $100 per employee and can further increase to $200 per employee for repeat violations

How does SB 1162 California define “pay scale”?

SB 1162 defines “pay scale” as the “salary or hourly wage range that the employer reasonably expects to pay for that position.” 

If you currently haven’t established any set pay ranges, we recommend conducting a pay equity audit to help establish them. 

Are there penalties for failing to disclose pay ranges in job listings?

Penalties for non-compliance have indeed been introduced. For example, civil penalties can soar up to $10,000 per violation if an organization fails to comply with pay disclosure requirements.

How does California law SB 1162 affect employers outside California?

For pay data reports:

SB 1162 requires employers with 100 or more employees, with at least one employee working in California to submit pay data reports. This means that employers from any U.S. state must file a report if they have at least 100 employees and one or more work in California. 

An organization located in California won’t be required to file a pay data report if it has 100 employees, but none of them work in California. 

We’ve based this information on the Civil Rights Department’s FAQs for the previous pay reporting law. Though unlikely, it’s possible for it to change. 

For pay scale disclosure:

SB 1162 requires employees with 15 employees or more to disclose pay ranges in job postings. But should employers outside California count all employees or just the ones in California? This is unclear. 

Now that California SB 1162 has been signed into law, the Civil Rights Department may provide further clarification soon. 

What are the next steps?

Where to begin? How can you make complying with SB 1162 California law’s requirements as painless as possible? 

Best practices include:

  • Conducting a pay equity audit and adjust pay for any identified pay disparities
  • Establishing equitable pay ranges for existing and new positions
  • Updating all job postings to include pay range information
  • Leveraging pay equity audit results to avoid causing situations where the pay for current positions does not reconcile with new positions, e.g., wage compression 
  • Verifying that your record-keeping policies comply with SB 1162 California’s requirements
  • Communicating any changes regarding pay equity to your employees and stakeholders 

To accomplish these goals before the law’s start date of January 1, 2023, organizations should leverage pay equity auditing software, like PayParity

PayParity conducts a pay equity audit at the intersection of gender and race/ethnicity, identifies pay disparities, allows for customizable remediation goals for addressing compensation issues, and helps you establish equitable pay bands based on internal and external market values. With PayParity’s Equal Pay Estimator, organizations can confidently price jobs so that they are equitable and competitive. Schedule your demo here and see what PayParity can do for your business.

To learn more about California SB 1162, including real-world examples of how it affects different employers, download the Everything You Need to Know about California SB 1162 white paper below:

Download: California SB 1162 White Paper

Pay equity laws are coming into play all over the world. Download the Pay Equity Definitive Guide to understand what’s required of your business.