California Labor Commissioner Provides Clarification on New Pay Transparency Law

On December 27, 2022, the California Labor Commissioner updated its Equal Pay Act Frequently Asked Questions (FAQs) to provide additional guidance on the state's new pay transparency law that became effective on January 1, 2023. As previously reported by DWT here and here, Senate Bill 1162, which amended Labor Code section 432.3 and Government Code section 12999, significantly expanded California's already progressive pay transparency and data reporting requirements.

New Pay Transparency Law

In 2017, California passed the first mandatory pay transparency law, requiring employers to provide pay scale information (i.e., salary or hourly wage range) to job applicants upon request. Now, with the implementation of SB 1162, the following new expanded requirements are in effect:

• All employers are required to provide, upon request, an employee with the pay scale for the position in which the employee is currently employed.
• All employers with 15 or more employees are required to include the pay scale in any job posting.
• The pay scale must be included in any job posting by any third party retained by the employer to advertise a job posting.
• Employers are required to maintain records of job title and wage rate history for all employees for the duration of their employment, plus three years.
• Employees may file complaints with the Labor Commissioner within one year of the date the employee learned of the violation. Employees may also bring civil actions for violations of these laws. The Labor Commissioner may assess civil penalties in the range of $100 to $10,000 per violation.

Key Clarifications by Labor Commissioner

The updated Equal Pay Act FAQs provide the following guidance:

• Only One California Employee Required: The Labor Commissioner clarified that the new law requiring the inclusion of pay scales in job postings applies to an employer of a total of 15 employees with "[a]t least one of the employees [] currently located in California." Thus, for the law to apply to an employer, only one California employee is required, and all other employees can be located in other states.
• Employee Headcount: Some requirements in the new law only apply to employers with 15 or more employees. With regard to who is to be counted as an employee for the 15-employee threshold, the Labor Commissioner interprets this requirement to be consistent with how it counts employees for purposes of 2022 COVID-19 Supplemental Paid Sick Leave and minimum wage rates, as detailed in previously issued FAQs on the topic, which can be found here. The previously issued FAQs define an employee as "[a]ny individual performing any kind of compensable work for the employer who is not a bona fide independent contractor . including salaried executives, part-time workers, minors, and new hires." Additionally, these FAQs provide clarification on how to count employees of franchises, staffing agencies, labor contractors, joint or multi-employers, a group of corporations, and businesses with a parent company and subsidiary.
• Remote Workers in California: With regard to the type and scope of job positions to which the new posting requirement law applies, the Labor Commissioner clarified that "the pay scale must be included within the job posting if the position may ever be filled in California, either in-person or remotely." Employers should take note of this particularly broad interpretation.
• Pay Scale Can Include Hourly or Set Piece Rate: Labor Code section 432.3 defines "pay scale" as "the salary or hourly wage range that the employer reasonably expects to pay for the position." The updated FAQs state that an employer may provide an hourly amount or set piece rate amount in a job posting, if that is how the position is intended to be paid.
• Piece Rate or Commission Wages: If a position's hourly or salary wage is based on a piece rate or commission, as is allowed by law (Labor Code section 200), then the piece rate or commission range the employer reasonably expects to pay for the position must be included in the job posting.
• Bonuses, Tips and Other Benefits: The Labor Commissioner advises that there is no legal requirement that any compensation or tangible benefits provided in addition to salary or hourly wage (such as bonuses, tips or other benefits) be included in job postings, although an employer may want to include this information to make its recruitment efforts more competitive. However, the updated FAQs did caution that such other forms of compensation may be considered for equal pay purposes.
• Link to Salary Range in Electronic Posting Not Acceptable: The Labor Commissioner clarified that a link to a salary range in an electronic posting is not acceptable, and the pay scale information must be included within the posting itself.

Employer Takeaways and Next Steps

With the recent implementation of the new pay transparency laws, it is highly recommended that California employers consult with legal counsel and take the following steps to ensure compliance with the revised requirements and to avoid potential penalties:

• Review and assess current and existing job postings prepared either internally or by third parties.
• Assess and revise recordkeeping practices as needed.
• Ensure proper training for all employees whose duties are impacted by the new laws.
• Take all necessary steps to prepare for inquiries from existing employees regarding pay scale and salary range.
• For those employers with employees in states other than California, become familiar with the pay transparency laws of those jurisdictions.

The Labor Commissioner may issue further guidance in the future. As always, DWT will continue to monitor pay transparency laws and provide updates as they occur. In the meantime, please do not hesitate to contact the DWT Employment Services Group with any questions you may have.