California Releases Guidance on Pay Scale Disclosures

On December 27, 2022, the California Labor Commissioner’s office released eagerly anticipated Frequently Asked Questions (“FAQs”) on the state’s new pay scale disclosure requirements under the Equal Pay Act, which are effective on January 1, 2023.

The guidance clarifies some of the outstanding questions on compliance with the requirements introduced in SB 1162. The FAQs clarify which employers will be subject to the pay disclosure requirements and the content of the mandatory disclosures. Of note, the FAQs do not clarify whether the requirements only apply to postings made on or after January 1, 2023, or if it will apply to all postings that remain active as of January 1, 2023.

Who Must Comply?

Under Labor Code 432.3, “an employer with 15 or more employees must include the pay scale for a position in any job posting.” The  FAQ explains that the Labor Commissioner will count employees using the same methodology applied for Supplemental Paid Sick Leave as explained in a previous FAQ.  The disclosure requirements apply if an employer has at least one employee located in California.

Does This Apply to Remote Postings?

If a position can be filled in California, either remotely or in person, then the pay scale must be included in job postings.

What Must Be Disclosed?

Pay Scale Definition

The FAQs confirm that a pay scale is limited to the “salary or hourly wage range the employer reasonably expects to pay for a position.”  A set hourly rate or set piece rate may be included in place of a pay scale if an employer “intends to pay a set hourly amount or a set piece rate amount, and not a pay range.”  Bonuses, tips, and other benefits are not required to be included in the pay scale.  Employers may voluntarily provide information on “compensation or tangible benefits provided in addition to a salary or hourly wage.”  However, the Labor Commissioner reminds employers that “other forms of compensation may be considered for equal pay purposes.”

Mandatory Disclosure of Piece Rate and Commission Compensation

Positions that are compensated on a piece rate or commission basis must include the piece rate or commission range the employer reasonably expects to pay for the position.

How Can Employers Make Disclosures?

In a key departure from some of the other jurisdictions that have enacted pay scale disclosure requirements, employers cannot link to the salary range in an electronic posting or include a QR code in a paper posting. The pay scale must be included on the posting itself.

Reminder of New Record Retention Requirement

In addition to the new pay scale disclosure requirements, an employer must keep 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. These records must be open to inspection by the Labor Commissioner, which the Labor Commission may then use to determine whether there is a pattern of wage discrepancy.

What Should You Do to Prepare?

Employers should ensure that all job postings posted on or after January 1, 2023, contain the required pay scale information.  In particular, employers who previously intended to provide links to the pay scale should instead include the pay scale directly in the job postings. 

It is imperative to carefully review postings before they are created as employers who fail to comply can be subject to penalties ranging from $100 and no more than $10,000 per violation.  Seyfarth’s Pay Equity Group is available to assist employers finalizing pay scale disclosures and can provide guidance on any related pay transparency questions.