New Guidance on Pay Transparency for Applicants and Employees
As you all know from our recent Newsletter and our recent Breakfast Briefing, effective January 1, 2023, employers are required to engage in certain new behaviors that increase the transparency of their pay practices. In case you missed it, here is a link to our Year-End Newsletter: 2022 Developments in Employment Law: What California Employers Need to Know in 2023, which includes a detailed summary.
On December 27, 2022, the California Department of Industrial Relations (“DIR”) issued answers to some Frequently Asked Questions with respect to the new transparency rules. Below you will find the new rules, with the answers to the FAQs embedded in bold text. We recognize that this won’t answer all the questions you may have, so please reach out if you would like to help applying the new rules.
All employers, regardless of size: Must provide a “pay scale” for a current employee’s position at the employee’s request.
Pay scale means the salary or hourly wage range (or set hourly rate if the employer knows that already) the employer reasonably expects to pay for the position. Pay scale does not include bonuses, tips, or other benefits. However, it does include any piece rate or commission wages.
The pay scale must actually appear on the posting. Employers may not rely on a link or QR code that takes the reader to the salary information.
What about Remote Workers? This requirement applies to any job posting that could possibly be filled by a person in California, regardless of whether the employee is remote or in person; i.e., if an employer advertises for a remote position that could be filed by someone working remotely in CA then they have to include the pay scale (even if the job also could be filled by a non Californian).
For these same employers: there are new record retention requirements, including that employers must maintain records of job titles and wage rate histories for the duration of an employee’s employment and three years after termination of employment. The California Labor Commissioner will have authority to inspect these records. Failure to comply with the pay scale disclosure or record retention requirements can result in penalties ranging from $100 to $10,000 per violation.
Employers with more than 15 employees: Must include a pay scale (as defined above) in all job postings (and provide that information to third parties who post those jobs).
Employers will calculate their total employees the same way they did under the 2022 COVID-19 Supplemental Paid Sick leave regulations: the employer must use a reasonably method of counting employees and that the count includes exempt employees and part time employees.
This count includes workers outside of California as well, as long as at least one (1) employee currently is located in California. For example, 14 employees could be working in Arizona and one employee in CA, and the requirement applies to the Company. Extrapolated, this likely means that if 99 employees are scattered across the US, and one employee is in California, the Company must comply with the rules for employers with 100 or more employees.
Employers with 100 or more employees: Have additional pay data reporting requirements to submit to the California Civil Rights Division (formerly the Department of Fair Employment and Housing) (the “CRD”), regardless of whether they need to submit EEO-1 reports.
Reports now are due annually on the second Wednesday of May. The first report is due on May 10, 2023, based upon calendar year 2022 pay data. Also, the number of data categories those employers are obligated to report is expanded. Please let us know if you would like more detail on what the reports must include.
A person may file a complaint with the Labor Commissioner’s office for violation of these provisions. They have one year to do so.
We recognize that this won’t answer all the questions you may have, so please reach out if you would like to help applying the new rules.