As current government agencies work to expand employee rights, pay transparency laws are spreading across the nation. While many current pay transparency laws are state-level, major cities are moving forward with their regulations. These pay transparency laws require employers to be “transparent” with salary ranges and benefits. Explicitly, depending on the area, these laws could require employers to:

  • Provide applicants with the salary range for a posted position at a specified point during the hiring process;
  • Reveal to employees a salary range upon request, when changing jobs, or upon hire; or
  • Include salary range in job postings.

Markedly, just over the past week, California and New York City announced new or updated transparency laws. Earlier, California announced new legislation for fast food workers, improving workplace conditions and pay disparities.

California’s Pay Transparency Law

On September 27th, 2022, California Governor Gavin Newsom signed Senate Bill 1162 (SB 1162) into law. The law’s effective date is January 1st, 2023. Known as the “Pay Transparency Law,” SB 1162 significantly expands on the high-level disclosure payroll requirements currently in place. Particularly, SB 1162 expands on California employers’ duties to provide pay data reports to the California Civil Rights Department (Department).

Overview of SB 1162 – Pay Data Reporting

Previously, private employers with 100 or more employees that were required to file an annual Employer Information Report (EEO-1) needed to submit a similar report to the Department on or before March 31. Given that, SB 1162 expands on the existing requirement in five significant ways:

  • Firstly, SB 1162 requires ALL private employers with 100 or more employees to submit a pay data report to the Department. This is regardless of whether they were required to submit an EEO-1 report under federal law. Secondly, the deadline to submit the Department’s report will be the second Wednesday in May 2023 and each year after.
  • Thirdly, employers must now include information regarding the median and mean hourly rate for each combination of race, ethnicity, and sex within each job category. Employers must also provide the number of employees in each pay band used by the U.S. Bureau of Labor Statistics.
  • Fourthly, SB 1162 expands reporting requirements to include all employees directly hired by the employer and hired through labor contractors. Specifically, employers that hire 100 or more employees through labor contractors must submit a separate pay data report covering these employees. The employer must also disclose the ownership names of all labor contractors used to supply these employees.
  • Finally, employers are now permitted but are not required, to include a “clarifying remarks” section on the report. Generally, this section would consist of additional relevant information for the reviewing body.

Accordingly, failure to comply with SB 1162’s pay reporting requirements may result in penalties of up to $100 per employee. Any subsequent failures to follow the regulation could result in fines of $200.

Overview of SB 1162 – Pay Disclosure

Additionally, SB 1162 also requires the following:

  • Employers must provide to current employees upon request the “pay scale” for the employee’s position.
  • Workplaces with 15 or more employees must include the “pay scale” for an open position in any job posting.
  • Further, California employers must maintain records of job titles and corresponding wage rate histories for the duration of the employee’s employment plus three years after the work has ended.

Failure to comply with either of these requirements can result in penalties that range from $100 to $10,000 per violation.

New York City’s Pay Transparency Law

One of the other pay transparency laws of note is the new regulation in New York City, Local Law 32. Starting November 1st, 2022, employers with four or more employees who advertise jobs for full or part-time employees in New York City must include a good faith minimum and maximum salary range or hourly wage. Generally, employers must provide this range for every job, promotion, and transfer opportunity, provided the work is performed in whole, or in part, within the five boroughs of NYC.

Failure to comply with NYC’s salary transparency law violates the NYC Human Rights Law. The NYC Commission on Human Rights enforces the law. Consequently, an employer may have to pay penalties up to $250,000 for an uncured first violation and any subsequent violations.

Employer Takeaways

In conclusion, California and New York City employers should review their policies immediately to comply with the new pay transparency laws. Specifically, employers should review their policies related to pay reporting and pay transparency in advertisements. Pay transparency laws are becoming more prevalent as the years go by. Every state could be affected by new pay laws in the near future. One easy way to stay compliant with not only wage and hour but also workplace safety and equal employment laws is to verify information on and display required labor law posters. Labor law posters ensure that employees understand their rights in the workplace and are aware of how to report a violation of those rights. Correctly displaying the required posters also saves companies from fines, penalties, and lawsuits.