California Pay Transparency Law SB 1162: Employer Rules, Compliance, and Penalties

California’s Pay Transparency Law SB 1162 requires employers to disclose pay ranges, maintain records, and submit annual wage reports. Non-compliance can result in financial penalties, lawsuits, and reputational damage for businesses across California.

By Douglas Wade, Attorney

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Table of Contents

1. Introduction

2. The Significance of California Pay Transparency Law, SB 1162

3. SB 1162: California Pay Transparency Law

4. The Objective of Reducing Racial and Gender Pay Disparities

5. Employers’ Essential Obligations Within California Pay Transparency Law, SB 1162

6. Violation in the Workplace: Penalties for Non-compliance

7. HR Best Practices and the Effect on Employers

8. The Implications of California’s Pay Transparency Laws for Your Company

Introduction

The concept of pay transparency is gaining prominence in almost all industries in the United States. The debate on fair remuneration and equality in the workplace is on the rise. The objective is to establish more equitable and inclusive work cultures. The California Pay Transparency Law, SB 1162, has become an important aspect to be considered by organizations. Its understanding and compliance are necessary.

The California Pay Transparency Law, SB 1162, is significant to employers of both large and small sizes and in all industries. It was enacted in the quest to eliminate the disparity in wages between races and genders. In this post, the key aspects of the law, its impact on employers, and the way to remain compliant will be summarized.

The Significance of California Pay Transparency Law, SB 1162

The emphasized transparency in pay is just not a trend. It is a response to the increased demands of fairness and justice in pay policies in the nation. There has been pressure on employers to be more open about their pay systems.

SB 1162 limits specific recruiting practices. It mandates that firms disclose compensation information more publicly. The legal requirements will have to be fully understood by the employers. The inability to adhere to these new rules can result in fines, prosecution, and damage to the business’s image.

SB 1162 will also mandate some companies to provide an annual report on the wage data to the Civil Rights Department.

SB 1162: California Pay Transparency Law

SB 1162 assists in reducing the wage gaps among races and genders.

This rule requires employers to adhere to it by making some disclosures about their compensation policies. Regardless of sector, most firms with fifteen or more workers are subject to the regulation. They should be aware of the general trends in salary transparency, even though the law will now demand wage disclosures for companies with fewer than 15 employees.

The Objective of Reducing Racial and Gender Pay Disparities

This law was passed in part to try to reduce the disparity in wages between racial groups and between women and men in California. Enacting this law was a proactive measure to address the pay gaps. The Civil Rights Department found that disparities were costing racial groups and women billions of dollars in lost wages annually. CRD’s 2021 data said:

Women were only making approximately 81 cents for every dollar earned by men.
The women earned less in nearly all the sectors that were examined.
Pay disparity is greater among women of specific races.

Employers’ Essential Obligations Within California Pay Transparency Law, SB 1162

You are required to abide by the California Pay Transparency Law, SB 1162, if you fulfill the aforementioned standards. The following actions can be taken by the human resources department to guarantee compliance:

1. Requirements for Pay Disclosure

The obligation to include wage ranges in job advertisements is one of the most significant components of California’s Pay Transparency Law, SB 1162. Employers must provide the anticipated salary range in every publicly accessible job posting as of 2023. Job boards, corporate websites, and third-party hiring platforms are examples of this. Given the abilities, experience, and other pertinent characteristics for the role, the wage range should represent what the company is willing to pay for the job in question.

Employers are also required to offer pay ranges upon request throughout the employment process. The employer should be able to supply this information promptly and without any kind of punishment or reprisal if a candidate requests it. For those looking to make better selections regarding job possibilities and possible job offers, this stage makes sure that job seekers have a better idea of what they can anticipate in terms of salary.

2. Prohibition of Salary History Investigations

Employers are not allowed to inquire about an applicant’s prior pay history under SB 1162. Because it prohibits companies from using a candidate’s prior remuneration as a baseline, this is a big move for a lot of organizations. Since women and individuals of color have historically received lower earnings than their peers, the prohibition is justified by the desire to end the practice of offering lower compensation based on prior wages.

Employers must modify their hiring procedures as a result of this regulation. Employers must consider the position’s worth as well as the candidate’s qualifications and expertise, rather than past salary, when determining salary.

3. Rights of Employees Within the Pay Transparency Act

Certain rights are also granted to employees by the California Pay Transparency Law. Employers are required to give workers a wage range for their present position, and workers have the option to request it. An atmosphere where workers may more effectively speak for themselves and ensure they are not being paid less than their peers who are doing comparable work is fostered and supported by this transparency.

Employees may voice complaints if they think their pay falls short of the listed range. This law provides employees with the means to guarantee they are receiving just compensation. It promotes openness.

4. Requirements for Compliance and Recordkeeping

The pay ranges for each position, along with any information related to the methodology used to arrive at those ranges, must be kept on file by employers. Employers are also in charge of keeping track of applicants’ and workers’ pay information for the purpose of auditing. In the event of a review or audit by the state’s labor department, companies will be required to present these documents as proof of their adherence to California’s pay transparency regulations.

Lastly, each year, employers will be required to submit a pay data summary to the California Civil Rights Department (CRD) that contains information on the wages and demographics of their employees. Every year on the 2nd Wednesday of May, the state’s Pay Report is due.

Violation in the Workplace: Penalties for Non-compliance

Violation of the Pay Transparency Law SB 1162 by employers in California has some hard consequences. These violating employers can be fined or punished. An employer who fails to indicate pay scales in their job advertisement can be fined as much as $100 per violation, and subsequent violations may be fined as much as $200.

Also, an employer can face up to $500 as a penalty for the first violation and up to $1000 penalty for subsequent violations in the event that CRD identifies that the employer is not complying with or filing the required wage reports.

Workers or job seekers have the right to initiate a lawsuit if they feel that their legal rights were violated. An employer at fault might have to deal with high legal costs and losses. There will be harm to their business’s reputation and financial performance. It’s critical for HR to comprehend its role in collaborating with the company to ensure legal compliance.

HR Best Practices and the Effect on Employers

The California Pay Transparency Law offers HR both opportunities and difficulties. Businesses must change their existing process to be in line with the legislation. It gives businesses the opportunity to demonstrate their commitment towards equity and justice and build a strong employer brand.

Companies must consider the following basics on which the HR may provide guidance:

Refresh Job Advertisements and Job Summaries: Review and revise every job Advertisement to add pay ranges. This will enhance the candidate experience, besides helping in facilitating compliance. As pay arrangements evolve, make sure to maintain these adjustments.
Examine the Pay Structures: Spend some time evaluating the present compensation policies of your organization. Can any areas with pay differences be resolved? Use this opportunity to make your pay plans fair, competitive, and legal.
Train Hiring Executives: The interviewers and hiring managers should be conversant with the legal requirements. They ought to know that seeking past wage history of a candidate is prohibited, and upon request, they are compelled to provide wage limits in contract negotiations.
Be Ready for Multi-State Matters: It is necessary to be on top of the many pay transparency requirements, in case your company operates across multiple states. There are possible regulations that may be equal to or even stricter than those in California. HR should consult lawyers or other experts to make sure their organization is on the right track, regardless of the region where they do their business.

The Implications of California’s Pay Transparency Laws for Your Company

SB 1162 brings a radical change in how employers organize and disclose salary data. Your being up-to-date and meeting all legal standards will help facilitate the establishment of an equal working environment for employees. Positive intervention will help protect the future success and image of your company.

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California Pay Transparency Law SB 1162: Employer Rules, Compliance, and Penalties

Introduction

The Significance of California Pay Transparency Law, SB 1162

SB 1162: California Pay Transparency Law

The Objective of Reducing Racial and Gender Pay Disparities

Employers’ Essential Obligations Within California Pay Transparency Law, SB 1162

Violation in the Workplace: Penalties for Non-compliance

HR Best Practices and the Effect on Employers

The Implications of California’s Pay Transparency Laws for Your Company

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