California Updates Pay Data Reporting Requirement for Employers and Imposes New Pay Data Disclosure Requirements

On September 27, 2022, California Governor Gavin Newsom signed SB 1162 into law. SB 1162 goes into effect on January 1, 2023 and is follow-up legislation to SB 973 – California’s original pay data reporting law.

SB 1162 now (1) requires that, starting on the second Wednesday of May 2023 (and thereafter annually), private employers of 100 or more employees (“Covered Employers”) submit annual pay data reports to the California Civil Rights Department pursuant to updated requirements, as set forth below; and (2) imposes new pay disclosure requirements for California employers.

Updated Pay Data Reporting Requirements

In 2020, California enacted SB 973, which mandated private employers of 100 or more employees that are subject to federal Employer Information Report (EEO-1) filing requirements to submit an annual pay data report to the Department of Fair Employment and Housing (DFEH). As between EP and its production company clients, it is the production companies that must file the pay data reports with the State of California for their talent and crew. SB 1162 amends and expands the pay data reporting requirements as follows:

1. In contrast to SB 973 – which applied only to employers with 100 or more employees that also were required to file an annual EEO-1 report pursuant to federal law – SB 1162 now requires any California employer with 100 or more employees in the United States to submit an annual pay data report, regardless of whether or not it is required to file a federal EEO-1 report.
2. Similar to SB 973, SB 1162 requires that Covered Employers report pay data on their California employees who are employed during a “Snapshot Period” (a single pay period) that falls between October 1 and December 31 of each year.
3. The reporting deadline is changed from March of each year to “on or before the second Wednesday of May 2023, and on or before the second Wednesday of May of each year thereafter.” The May 2023 report will cover the prior calendar year, which is still referred to as the Reporting Year.
4. The report must now identify the median and mean hourly rate (derived from the W-2s) for each combination of race, ethnicity, and sex across 10 different job categories (similar to the EEO-1 categories), in addition to the headcount of employees across each combination of race, ethnicity, and sex across the 10 job categories.
5. The report must identify the total number of hours worked by each employee counted in each pay band during the Reporting Year.
6. Each report shall include the employer’s North American Industry Classification System (NAICS) code.
7. For Covered Employers with multiple “establishments,” the employer can no longer submit a consolidated report. Instead, the employer must submit a report covering each establishment. As before, an “establishment” is defined as an economic unit producing goods or services.
8. Employers with 100 or more employees who were hired through labor contractors now must produce data in a separate pay data report covering the employees hired through labor contractors in the prior calendar year. A “labor contractor” is defined as an individual or entity that supplies, either with or without a contract, a client employer with workers to perform labor within the client employer’s usual course of business.

SB 1162 now imposes a civil penalty of up to $100 per employee (initial violation) and up to $200 per employee (subsequent violations) for any employer that fails to file the required reports.

We expect the Civil Rights Department to issue updated FAQs to provide guidance on compliance with SB 1162. The FAQs for SB 973, which is the current version of the law, are available here.

EP currently provides its clients with assistive EP data reports derived from client-submitted payroll start cards to support client compliance with EEO-1 and SB 973 reporting and offers a Diversity Management solution to enable clients to fulfill their SB 973 reporting obligations. EP will be enhancing its Diversity Management tool to support client compliance with SB 1162 as well. For information on EP’s Diversity Management tool, please contact your Account Management team or our Insights team at Insights@ep.com.

New Pay Disclosure Requirement

Pursuant to California’s new pay disclosure requirements, employers must comply with the following:

• For Job Applicants:
  • No employer may rely on the salary history information of a job applicant as a factor in determining whether to offer employment, nor to ascertain what salary to offer the applicant; and
  • Upon reasonable request, an employer must provide the pay scale for a position to a job applicant. A pay scale is defined as the salary or hourly wage range that the employer reasonably expects to pay for the position.
• For Employees:
  • Upon request, an employer must provide a pay scale for a current employee’s position.
  • Employers also must maintain records of a job title and wage rate history for each employee for the duration of the employment plus three years after the end of the employment.
• For Job Postings:
  • All employers with 15 or more employees must include the pay scale for a position in any job posting, including when the position is advertised by a third party.

SB 1162 imposes a civil penalty of between $100 and $10,000 per violation of the pay disclosure requirements, depending on the violation.

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For any questions about this Alert, you may contact:

Pantea Lili Ahmadi, Director, Corporate & Employment Law Counsel | pahmadi@ep.com
Alan Wu, Director, Employment & Labor Relations Counsel | awu@ep.com
Joe Scudiero, Senior Vice President & Chief Labor Counsel | jscudiero@ep.com