California Pay Transparency Is Here January 1, 2023: 7 Questions to Help Determine If Your Organization Is Ready

By Hannah Jones, Anthony Risucci, Troy Valdez, Fred Alvarez

Beginning January 1, 2023, California will join a minority of jurisdictions that impose significant pay transparency requirements on employers. California’s law, however, goes further than existing mandates in Colorado, New York City, and other states and municipalities. In case you missed it, California’s new law was covered extensively in our previous alert.

To recap, SB1162 imposes four main obligations of California employers. First, employers with 15 or more employees must post pay scales on all job postings. Second, the new law will require all employers—regardless of size—to provide pay scale information to employees upon request. Third, employers must maintain pay history information for every employee for three years after termination. Finally, employers with more than 100 employees must submit annual “pay data reports” to the California Civil Rights Division by the second Wednesday of every May starting May 2023.

Failure to comply with SB1162’s pay scale mandates can result in civil penalties ranging from $100 to $10,000 per violation, depending on the circumstances. While the Labor Commissioner is authorized to assess and levy penalties, the new law also provides a private right of action for individuals to seek injunctive and “any other relief that the court deems appropriate” for violations. While the law has yet to be tested in court, and despite there being a private right of action, aggrieved employees may also attempt to claim the right to sue collectively under the California Private Attorneys General Act (PAGA)—a law that allows employees to pursue civil penalties on behalf of the state on a representative basis without meeting the rigorous requirements of class certification. Thus, non-compliance can lead to significant litigation exposure beyond just the penalty for one violation.

To assess whether your organization is ready for California’s pay transparency obligations and to protect against the litigation risks of non-compliance, consider the following:

  1. Have you established the “pay scale” for all positions within your organization?
  2. How will you set the “pay scale” range given factors like geography, experience and education, and will you follow the same formula for each role?
  3. Do you have a process for responding to employee requests for pay scale information?
  4. How will you draft job postings for remote positions that can be performed anywhere, including California?
  5. Are you compliant with existing pay transparency laws (e.g., Colorado and New York City), and will you provide pay transparency information to applicants and employees outside of states that require it?
  6. What additional pay records will you need to maintain beyond your current practice?
  7. How will you respond to questions from existing employees that request pay information regarding where they sit in the pay scale?

While this is not an exhaustive list to help prepare for pay transparency in 2023, these are some of the key questions that each organization should consider and answer before the new year. Contact Coblentz Patch Duffy & Bass LLP’s Labor and Employment practice group for more information about pay transparency compliance.