With California’s new pay transparency and pay reporting obligations under S.B. 1162 now in effect, employers are seeking answers on various open questions for complying with the new law. As we previously reported, S.B. 1162 requires employers with 15 or more employees to include pay scale information in each job posting for positions in California, as well as disclose information to current California employees upon request. Failure to comply with these requirements can result in significant civil penalties (ranging from $100 to $10,000 per violation) and possible government investigations or private lawsuits.
Although we are still waiting for more formal guidance, California Department of Industrial Relations (DIR) recently released new Frequently Asked Questions (FAQs) that provide some key interpretations of S.B. 1162.
- Extraterritorial Application: One of the major open questions for S.B. 1162 was how to count employees to determine coverage. The FAQs state that the pay transparency requirements under S.B. 1162 will cover any employer that has at least 15 employees anywhere (even outside California) and at least one of those employees is in California.
- Applies to Remote Jobs: The FAQs clarify that the new law applies to any job that can be performed by someone based in California, either working in person or remotely. This means that the Labor Commissioner believes the pay scale disclosure requirements apply to any remote positions where the employer could potentially hire someone located in California.
- Pay Scale Cannot Be Linked to Job Postings: The FAQs state that pay scale information must be included directly within the job posting and cannot be linked in an electronic posting. Covered employers also cannot use a QR code in a paper posting that will take the applicant to the salary information. This interpretation is a departure from some other state pay transparency laws, such as Colorado, that permit employers to include links or QR codes in job postings to pay range information.
- Pay Scale Does Not Include Bonuses, Tips, or Other Benefits: The FAQs also clarify that “pay scale” means the salary or hourly wage range the employer reasonably expects to pay for a position and does not include bonuses, tips, or other benefits. If employers pay on a commission or piece rate, however, employers must include the piece rate or commission ranges they reasonably expect to pay for the position in the job posting. The Labor Commissioner noted that employers are free to include other forms of compensation to make its recruitment efforts more competitive but cautioned that such compensation would still be considered for equal pay purposes.
- Retaliation Remedies: S.B. 1162 requires that individuals must file a written complaint with the Labor Commissioner within one year of the date the individual learned a violation occurred. The FAQs state that employees may also file a claim for retaliation with the Labor Commissioner or by filing a civil complaint in court within one year of retaliation. The FAQs further provides that a prevailing plaintiff can be awarded reinstatement, back pay, interest, and other remedies. The Labor Commissioner can also impose civil penalties ranging from $100 to 10,000 per violation.
What Does This Mean for Employers?
California’s pay transparency requirements are far-reaching and carry some significant remedies and penalties. Employers should review their current compensation and job posting policies and processes to ensure they are compliant with S.B. 1162. Multistate employers or employers who recruit for remote roles should also consider their strategies for compliance in light of the growing patchwork of pay transparency laws in other states and localities, including Colorado, New York State and New York City, and Washington. These laws impose similar requirements (including posting pay scales for remote roles that could be performed within those jurisdictions), but also have key differences that require employers to consider having a cohesive strategy for compliance.