Earlier this week California SB 1162 passed the state Senate and Assembly floor, clearing all California state legislative hurdles. The bill now advances to Governor Gavin Newsom who has until September 30, to sign it into law.

Following the success in the final rounds of California’s state legislature, Senator Monique Limón, who first introduced SB 1162 earlier this year, tweeted, “So proud of our efforts to put forth legislation that will help bring about a more equitable workforce — one that supports all families, women, and people of color. It’s time to finally close the #WageGap!”

Requirements of SB 1162 

If signed and enacted, SB 1162 would create greater pay transparency through a host of new fair pay requirements for employers. 

The first requires organizations with 15 or more employees to post the salary range or hourly rate for all job positions. Pay transparency like this is a growing trend in the U.S., as 10 states now require similar salary range disclosures in job listings.

Additionally, SB 1162 removes the ability for organizations to submit EEO-1 reports in lieu of a pay data reporting snapshot. To add to the level of reporting complexity, organizations must also submit separate reports containing workers’ pay and demographic data for employees hired through third-party staffing agencies.

Importantly, SB 1162 amends California’s already in place SB 973 pay data reporting law to require employers to submit mean and median pay information in the annual snapshots. The reason for this new addition is so that the state Civil Rights Department, formerly known as the Department of Fair Employment and Housing, can more easily identify pay discrimination within an organization.

To account for the more rigorous reporting requirement, California SB 1162 moves the annual filing deadline from March to May. This change is likely due to the fact that the annual pay data reports require more work up front from employers. Mean and median pay information for workers will require the organization to conduct pay analyses.

As a result of organizations conducting pay analyses, they may identify pay disparities that they were not previously aware of, which many experts believe will help close the various pay gaps still persisting in much of today’s workforce. As state and federal agencies alike have both expressed, pay data reporting is an invaluable tool for identifying pay discrimination. And the more granular the data, the easier it is to detect, correct, and prevent going forward.

Which organizations must comply with SB 1162?

If enacted, the law’s requirements affect all but the smallest employers. As previously noted, the pay transparency requirement applies to employers with 15 or more employees. The pay data reporting requirements apply to employers with 100 or more employees.

It’s important to note that while SB 1162 is a California law, any organization that meets the above two criteria and has at least one employee operating in California, must comply. That means that organizations headquartered in other states who have remote workers in California will also need to satisfy these new fair pay requirements.

SB 1162 non-compliance penalties

Perhaps the most significant addition to California’s pay data reporting law is penalties for non-compliance. Organizations that do not comply with the mandated requirements could be subject to penalties of up to $200 per employee

Since the California Civil Rights Department is already issuing non-compliance notices to organizations that failed to satisfy SB 973’s pay data requirements, it’s clear that the agency will be diligent and aggressive in assessing penalties for organizations that neglect their duties.

Preparing for the inevitable

At this time, SB 1162 is all but guaranteed. Some early provisions of SB 1162, including the requirement for the Civil Rights Department to make the pay data information publicly available, were struck in order to address the opposition’s concerns and to keep the bill moving through the process. 

Once Governor Newsom signs the bill into law, it will take effect beginning January 1, 2023, only four short months from now.

Employers need to begin preparing their data for the upcoming reporting period now. Conducting a pay equity audit is the single most important step organizations can take in understanding their workforce composition and pay equity risk. Our PayParity pay equity audit solution identifies pay disparities so organizations can correct them before filing reports with California’s Civil Rights Department.

Furthermore, our Equal Pay Estimator can help you establish equitable and competitive pay ranges for all new and existing positions so that when you need to post pay ranges for every job listing this coming January 1, 2023, you can feel confident.  The Equal Pay Estimator also helps you demonstrate transparent and fair pay practices, while simultaneously mitigating risks like wage compression.

If you’re interested in learning more about how Trusaic can help you prepare for emerging fair pay requirements, download the case study below.

Download: PayParity Case Study

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.