No Shame in the Pay Reporting Game: Pay Transparency Senate Bill 1162 Abandons Public Disclosure Requirement

Seyfarth Synopsis: SB 1162, which may soon be signed into law, will require employers to report even more pay data to the California Civil Rights Department (f/k/a the Department of Fair Employment and Housing until July 1, 2022), including median and mean pay gap information. A key contested provision that would have required the Civil Rights Department to post the pay data online, however, was recently removed from the bill.

SB 1162’s mission: require more pay data disclosures from employers. Accomplished? Almost.  California’s most recent pay transparency bill looks likely to become law before September 30th. With it, employers will be required to comply with a host of new pay data disclosure requirements.

One requirement initially included in the bill, however, did not survive the legislative process.  While SB 1162 proposed that the Civil Rights Department publish employers’ pay data on a public website, a recent amendment removed that requirement.  So what happens to the granular pay data that employers will report to the Civil Rights Department? Only the Civil Rights Department will have access to that information.

Reporting Changes

Proponents of SB 1162 believe that the current law does not do enough to ferret out pay inequities, and, through SB 1162, seek to impose the following changes:

• Revise the deadline to submit pay data reports, with the new deadline occurring annually on the second Wednesday of May each year.   
• Within each job category, SB 1162 would require that employers report the median and mean hourly rate by each combination of race, ethnicity, and sex. (Existing law, by comparison, requires only numerical counts of employees by race, ethnicity and sex within each job category and pay band).
• Employers that have 100 or more employees hired through labor contractors would have a new obligation to produce data on pay, hours worked, race/ethnicity and gender information in a separate report. The most recent amendment to the bill requires that labor contractors “supply all necessary pay data to the private employer,” but does not contain a separate mandate for the labor contractors to collect the “necessary pay data,” nor does it define the data required or address issues with regard to timing of such disclosures.  The bill also attempts to hold labor contractors responsible by allowing a court to apportion an “appropriate amount” of any penalties to any labor contractor who failed to provide required pay data to the employer. This will be difficult to implement in practice because employers rarely have access to labor contractors’ pay and demographic data.  The Department also requires that employers certify the accuracy of pay data reports, which would be practically impossible to do with respect to labor contractors’ data.
• Employers with more than 15 employees would be required to include a pay scale in all job postings (and to provide that information to third parties who post those jobs). New amendments to the bill would clarify that no penalty would apply for a first violation of this requirement if the employer can show that all job postings for open positions have been updated to include the pay scale.
• All employers, regardless of size, would be required to provide a pay scale for a current employee’s position at the employee’s request—in addition to the requirement in existing law to provide candidates for employment the pay scale for the position the candidate is seeking.
• Employers with multiple establishments would no longer be required to submit a consolidated report; rather, employers would continue to be required to submit a report for each establishment.

No Publication Requirement

Initially, SB 1162 directed that the Department publish each employer’s submitted pay reports.  The employer community objected to this requirement and Seyfarth Shaw provided testimony on this issue on behalf of Cal Chamber. 

Shortly thereafter, on August 15, 2022, an amendment removed the public disclosure provision.  If passed in its current form, the Department would only be allowed to publish “aggregate” reports that do not associate the pay data with individual employers. 

Looking Ahead

The final California Assembly vote will take place the week of August 29, 2022, and if the bill passes, it will return to the Senate for concurrence on the amendments and approval to move to Governor Newsom’s desk -- all of which must happen by August 31.  The Governor has until September 30 to approve or veto the bill.  If he approves it, the pay scale disclosure requirements would be effective beginning January 1, 2023.  The updated pay data reports, including mean and median pay gap information, would be due starting May 10, 2023.

Workplace Solutions

Employers should begin to plan compliance now, including compiling and reviewing data to identify areas needing attention. The authors and your favorite Seyfarth attorneys are always available to help employers navigate the road to compliance.