On or before the second Wednesday in March 2023 (and each second Wednesday in March thereafter), employers with more than one hundred employees in California must submit a report to the Civil Rights Department within the Business, Consumer Services, and Housing Agency.
Why?
California has released new pay transparency requirements. Those new requirements build on existing law and, more importantly, impose penalties for noncompliance.
What will need to be in the report?
The report must include the following:
- Employee numbers categorized by race, ethnicity, and sex within specified job categories. In order to compile these numbers, the employer can create a “snapshot” that counts all the individuals in each job category by race, ethnicity and sex during a single payer period of the employer’s choice between Oct. 1 and Dec. 31 of the “Reporting Year” (i.e., the previous year);
- The number of employees by race, ethnicity, and sex, whose annual earnings fall within each of the pay bands used by the United States Bureau of Labor Statistics in the Occupational Employment Statistics survey;
- The median and mean hourly rate of pay for each combination of race, ethnicity, and sex;
- The total number of hours worked by each employee counted in each pay band during the Reporting Year; and
- The employer’s NAICS (North American Industry Classification System) code.
Employers must file the report for each business establishment (defined as “an economic unit producing goods or services”), and must ensure that reports are searchable and sortable using readily available software. Employers may also submit optional clarifying remarks in the report.
What about employees hired through third parties?
Employers who hire employees through labor contractors must submit a separate report specifically for those employees hired through contractors. The separate report will include the same information as above but must also include the ownership names of the labor contractors. Labor contractors must provide the requested pay data to the employer (and if they don’t, the penalties described below will apply to the labor contractors in proportion to their fault).
What does this have to do with pay transparency?
Existing law already requires employers to provide position pay scale data to applicants for that position upon request. The new law will also require employers to provide that data to employees in that position upon request.
The new law will also require employers with 15+ employees to include position pay scale data in all job postings for that position. If an employer hires a third party to make job postings, the employer must ensure the third-party postings include pay scale data.
Employers must also maintain records of job title and wage rate history for each employee for three years after the end of the employee’s employment (so the Labor Commissioner can determine if there’s a wage discrepancy).
What are the penalties for non-compliance?
Employers who fail to comply with the new law will incur a $100 penalty per employee for first time violations and $200 per employee for each subsequent violation.
An employee or applicant claiming harm because of a violation of the new law (e.g., who doesn’t get the requested information) can file a complaint with the Labor Commissioner within one year of learning of a violation. The aggrieved person can file for injunctive relief (e.g., requiring the employer to turn over the information) and whatever other relief the Commissioner deems appropriate. If the Labor Commissioner finds a violation, the Commissioner can order the employer to pay a penalty between $100 to $10,000 per violation. The Commissioner determines the penalty amount based on the totality of the circumstances, including whether it’s a first-time violation or repeat offender. If the employer has failed to keep required records, then there’s a presumption in favor of the aggrieved person’s claim.
What if a business has fewer than 100 employees or fewer than 15 employees?
If a business has fewer than 100 employees, that business will not be required to comply with the reporting requirements described above, but if the business has fifteen or more employees they will still have to provide the position pay scale data to applicants, employees, and in job postings. If the business has fewer than fifteen employees they still have to provide position pay scale data to applicants and current employees but do not have to include the position pay scale data in job postings. All employers must maintain records of job title and wage rate history for each employee for three years after the end of the employee’s employment.
