Money Talks: California Expands Pay Disclosure Requirements

Effective January 1, 2023, employers in California will be subject to significant new pay disclosure requirements in the most sweeping expansion of United States pay transparency law to date.

What new requirements does the law impose? 

1. Disclosure of Pay Scale for all Job Postings.

First, California’s new law requires employers of 15 or more employees to disclose the salary or hourly wage range that the employer reasonably expects to pay for the position in all advertised job postings. 

While California law previously mandated that employers provide pay scale information to job candidates upon request, the new law requires that employers affirmatively provide this information in all job postings—including those advertised by third-parties, internal postings, and postings by public employers.

2. Disclose Pay Scale to Current Employees for their Position.

California’s new law also requires all employers to disclose—to current employees, upon reasonable request—the pay scale for that employee’s position.  

3. Annual Pay Data Report Required.

In addition, California's law requires that private employers with 100 or more workers submit a pay data report to the state's Department of Fair Employment and Housing, which must include the number of employees by race, ethnicity and sex in the following job categories:

1. Executive- or senior-level officials and managers.
2. First- or mid-level officials and managers.
3. Professionals.
4. Technicians.
5. Sales workers.
6. Administrative support workers.
7. Craft workers.
8. Operatives.
9. Laborers and helpers.
10. Service workers.

The report must also include (1) the number of employees by race, ethnicity and sex whose annual earnings fall within the pay bands used by the U.S. Bureau of Labor Statistics in the Occupational Employment Statistics survey, (2) the mean and median racial and gender pay gaps within each job category, and (3) the total number of hours worked by employees in each pay band. 

If the employer hires more than 100 employees through labor contractors, the employer must submit a separate pay data report as to those employees.

4. Recordkeeping. 

Finally, California’s new law imposes a burdensome record retention requirement on employers—records of an employee’s job title and wage history must be retained for three years after employment. Failure to keep these records creates a rebuttable presumption in favor of a claim by the employee. 

What is the intended purpose of these new requirements? 

Ultimately, the purpose of California’s new law is to prevent discrimination. Advocates assert that the new requirements are aimed at identifying and correcting potential pay disparities among genders, races, and ethnicities, and, although burdensome, serve as an opportunity to renew focus on pay equity. 

How Should Employers Prepare? 

Bearing in mind that these requirements take effect January 1, 2023, covered employers should:

• Determine the salary ranges for existing positions and make necessary adjustments for discrepancies.
• Include pay scale information in all job postings.
• Update records retention policies to comply with new record-keeping requirements. 
• Begin compiling data to generate the annual pay data report, due May 10, 2023. 

For additional questions regarding California’s new pay disclosure requirements, Womble Bond Dickinson’s Labor and Employment Team stands ready to assist.