Understanding SB 1162: California's Pay Transparency Act

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There has been a growing push for equity and fairness in the workplace, leading to the implementation of pay transparency laws. One such law is the California Pay Transparency Act, also known as Senate Bill (SB) 1162.

See a breakdown of the law here.

The California Pay Transparency Act aims to promote fairness by requiring employers to disclose pay ranges and provide pay scale information to employees.

Understanding and remaining in compliance with SB 1162 is crucial to avoid penalties and potential lawsuits.

Learn how to navigate the complexities of pay transparency laws and conduct fair compensation practices with the following topics:

  • Key changes
  • How to stay in compliance
  • Understanding labor contractor versus labor contractor employee
  • Tips for determining the pay scale

Key Changes Under SB 1162

Two main changes under SB 1162 are requirements around reporting data and pay notification.

Reporting Pay Data

Organizations with 100 or more employees are required to submit annual pay data reports to the California Department of Fair Employment and Housing (DFEH).

The mean and median hourly wage rates for each combination of race, ethnicity, and sex within each job category must be included in the report.

Pay Notification Requirements

Organizations with 15 or more employees must include following:

  • Pay scale for positions in any job posting
  • Information about the expected salary or hourly wage range for the position when advertising job openings
  • The pay scale, upon request, to current employees for their current position

How to Stay in Compliance with SB 1162

Organizations should consider the following steps to stay in compliance with SB 1162:

  • Review job descriptions. Review and update job descriptions to include pay ranges that align with the employer's compensation expectations.
  • Provide pay scales. Post pay scales for positions in all job postings on the organization's website and third-party platforms.
  • Respond to requests. Provide current employees with the requested pay scale information for their current position.
  • Retain records. Records of job titles and wage rate history for each employee need to be kept throughout their employment and three years after their employment ends.
  • File reports. File timely pay data reports with the California DFEH.

Consequences of Noncompliance

Noncompliance with SB 1162 may lead to civil penalties. Employers who don’t submit required pay data reports may face penalties of $100 per employee, with subsequent failures incurring penalties of $200 per employee.

Violations of pay scale notification requirements may also lead to civil penalties under the Labor Code's Private Attorneys General Act (PAGA). Noncompliance has also led to a rise in class action lawsuits, resulting in financial penalties for employers.

Understanding Labor Contractor vs. Labor Contractor Employee

It’s crucial to differentiate between a labor contractor and a labor contractor employee to accurately identify and report labor contractor employees.

  • Labor contractor. An individual or entity that supplies workers to a client employer to perform labor within the client employer's usual course of business.
  • Labor contractor employee. An individual on a labor contractor's payroll, including part-time individuals, who perform labor for a client employer within the client employer's usual course of business.

Tips for Determining the Pay Scale

Here are some steps organizations can take to determine pay scales:

  • Conduct market research. Research your area’s industry standards, market rates, and compensation practices for similar positions.
  • Consider internal factors. Assess your organization's budget, financial resources, and compensation philosophy. Consider your industry, competitive position, and talent acquisition and retention goals.
  • Define job descriptions. Establish clear job levels and classifications based on responsibilities, required skills, qualifications, and experience levels.
  • Consider additional factors. Account for geographic location, cost of living, and industry-specific considerations that may impact compensation. Adjust the pay scale accordingly.
  • Review and update. Continuously monitor changes in industry standards, economic conditions, and internal factors that may influence compensation. Regularly review and update pay scales to remain competitive and aligned with market trends.

We’re Here to Help

For additional information on SB 1162 or guidance on remaining in compliance, contact your Moss Adams professional.

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