FAQ on CA SB 1162: California’s Groundbreaking Pay Reporting & Pay Scale Disclosure Law

California’s SB 1162 is a groundbreaking law with first-in-the-nation requirements. With Governor Newsom’s signature on September 27, the fifth largest economy in the world will require that companies include pay scales on job postings beginning in January 2023 and report median and mean pay gaps and on contractor pay starting in May 2023. 

We previously posted a primer on what you need to know about the new law: what’s required, what it means for employers, and how to start preparing to ensure you’re in compliance. But following our recent webinar about CA SB 1162, we wanted to dig into some frequently asked questions that were asked at the webinar and after. As with all Syndio guidance, we are not a law firm; this is best practice advice and we encourage you to consult with counsel.

 

Implementation Date

When do the pay scale transparency law requirements start?  

The pay range and record retention requirements go into effect on January 1, 2023.  

 

When do we have to file the median and mean employee pay and contractor pay report?

The first pay report will be due on May 10, 2023.  Subsequent reports will be due the second Wednesday of May.

 

 

Pay Scale Disclosure

Has “range” or “scale” been defined? Is it the whole range or can it be just the range you would reasonably hire within?

CA SB 1162 defines “pay scale” as “the salary or hourly wage range that the employer reasonably expects to pay for the position.” The posted pay range applies just to base pay and does not include bonuses, equity, benefits, or any other forms or compensation or reward.

 

Does the pay scale disclosure cover remote postings as well, similar to NYC and CO laws?

Unlike some of the other laws and guidance that explicitly say that the law applies to remote roles (for example, Colorado and New York City), the California law does not specifically address whether the job covers remote job postings as well.  

What is known?  Companies based out-of-state and hiring for jobs to be done in California will be required to disclose pay ranges (so a company based in Nebraska hiring for a role in a California satellite office will have to include the range). The law will likely not require California-based companies hiring outside of the state to include the pay range in job postings (so, for example, a company headquartered in Los Angeles but hiring for a role in the Atlanta office won’t be required to include salary ranges on those job postings).

We may have more guidance from the State of California on the remote role question but as the laws are proliferating – and more require including pay range on remote roles – the less this guidance will matter. That’s because if you are an employer with employees in Colorado, or New York City, or other jurisdictions that explicitly cover remote work, you will already need to include the pay range in any job posting that allows for remote work because it is possible for such positions to be performed, at least in part, in Colorado or in New York City regardless of where the successful candidate is actually from.

 

Does the pay scale disclosure requirement apply to companies that are incorporated in NYC but have employees in CA?

Yes, so long as you have 15 or more employees, companies based out-of-state and hiring for jobs to be done in California will be required to disclose pay ranges.  So a company based in NYC or in Nebraska hiring for a role in a California satellite office will have to include the range). Smaller employers will still have to provide information “upon request” to covered employees.

 

Does the California law define job posting?

Job posting is not defined in CA SB 1162. 

 

Does “reasonable” come with any parameters, like range width, segmentation for hiring rates, etc.?

CA SB 1162 defines “pay scale” as “the salary or hourly wage range that the employer reasonably expects to pay for the position.” The posted pay range applies just to base pay and does not include bonuses, equity, benefits, or any other forms or compensation or reward. However, at this point, there is no guide as to range width or segmentation for hiring rates.

 

How does the law impact current employees?

All job postings are covered by the law.  In addition, employers must provide the pay scale to employees for their current role, upon request.  

The chart below shows how the pay scale transparency laws in other states impact current employees.

 

Which states require disclosing pay to current employees? (Click the + to expand each section below).

 

In regard to the requirement to provide current employees with the pay scale for their position: Is that retroactive? If an employee has previously asked and it wasn’t provided at that time since it wasn’t required, are we required to go back to that employee and provide it once this goes into effect? Or would they need to ask again?

As the law goes into effect January 1, 2022, it would be in effect from that day forward, not retroactively.  As a best practice, we recommend that you notify employees and other key stakeholders about the changes you will be making in terms of sharing pay ranges with both applicants and employees.

 

Can we utilize Total Rewards statements to release pay ranges?

Pay ranges must be included in job postings.  Total Rewards statements would be in addition to what is required in job postings but could likely cover the requirement to provide employees the range for their current role “upon request.”

 

I read the bill as not REQUIRING posting every job right? So not as stringent as CO in that respect.

That is correct. When CA SB 1162 was originally introduced, there was a provision that would have required employers to “announce, post, publish, or otherwise make known any opportunity for promotion and the pay scale for the position to all current employees on the same calendar day and prior to making a promotion decision.” However, this language was not included in the version passed by the State of California. The information needs to be included in any posted roles (for employers with 15+ employees). For roles that are not posted, this information still needs to be provided, if requested, to applicants applying for employment. Under the law, “Applicant” or “applicant for employment” means an individual who is seeking employment with the employer and is not currently employed with that employer in any capacity or position.

 

The NYC law requires posting what you expect to pay a successful candidate, not necessarily the full range of the role. Is California different with the “pay scale” of the role?

Similar to the NYC law, CA SB 1162 requires that you provide “the salary or hourly wage range that the employer reasonably expects to pay for the position.”

 

What happens if we hire or have a promotion that does not require a posting, anything to consider there?

If the job is not being posted and instead a candidate is being hired or promoted into the role, there is no job posting within which to include the pay scale. 

For roles that are not posted, this information still needs to be provided, if requested, to external applicants applying for employment. This is because in addition to the pay scale job posting requirement, the law still requires that “an employer, upon reasonable request, shall provide the pay scale for a position to an applicant applying for employment.”  This provision only applies to external roles. This is because the law defines an “applicant for employment” as “an individual who is seeking employment with the employer and is not currently employed with that employer in any capacity or position.” (emphasis added)

An employee can request the pay scale for the position in which the employee is currently employed. 

 

Is there any specific language stating how the pay scale must be communicated? For example: “The salary starts at $80k” versus “The salary range for the position is $70-90k”?

The law defines pay scale as the salary or hourly wage “range” that the employer reasonably expects to pay. The inclusion of the word “range” may suggest that providing only the minimum (i.e., “the salary starts at $80k”) would be insufficient. 

Guidance in other states, like Colorado, indicated that including only the minimum was not sufficient.  Colorado’s guidance provided: “A range’s bottom and top cannot include open-ended phrases like “$30,000 and up” (with no top of the range), or “up to $60,000” (with no bottom).”

 

Are there specific standards (perhaps a format) that CA is requiring as part of the disclosure of the pay scale to employees who request it?  For example, in writing, electronic, etc.?

No, not at this time. The current law did not have any format requirements.

 

When we talk about pay ranges, is it only base salary ranges?  What about incentive targets and equity eligibility and targets?

Yes, the law requires only the posting of pay scales associated with base salaries or hourly rates, not bonuses or equity.

 

Does the pay scale disclosure requirement apply to third-party staffing companies?

Yes, any employer with 15 or more employees that engages a third party to announce, post, publish, or otherwise make known a job posting shall provide the pay scale to the third party. The third party shall include the pay scale in the job posting.

 

Record Retention

Does having the records retained in HRIS systems satisfy the request? Or does it need to be hard copy?

The law requires that employers maintain records of a job title and wage rate history for each employee. While not specified in the law, retention in an HRIS system likely meets the requirement as long as the system will retain records in accordance with the guidelines in the law (that is, for the duration of the employee’s employment, 3 years after termination) and is available for inspection by the California Labor Commissioner.  

 

Is there any kind of record-keeping involved in the job postings with the pay range itself?  In other words, do we have to keep records of all job postings to show we included the pay range?  Or is it only when the posting is active?

There is currently no additional record-keeping requirement.

 

California Pay Report

Is this different than the CA Pay Data Reporting requirement that already exists?

Yes, CA SB 1162 modifies the current California pay data reporting in several meaningful ways.  Most meaningfully, employers will be required to submit the median and mean hourly rate for each combination of race, ethnicity, and sex within each job category and include a contractor pay report.  In addition, the filing deadline is now changed to the second Wednesday of May (from March 31st); the law would be expand the number of employers who need to file the report by removing the EEO-1 filing requirement (i.e., private educational institutions who do not file an EEO-1 report would now be required to file the pay data report); employers will no longer be required to file a consolidated report; and penalties and enforcement were beefed up by the amendments.

 

Is the definition of the employee based on the company premises physically being in California? What about employees that live in California but work for a company outside the state?

Per the FAQs on the current pay reporting law, which are unlikely to change on this point, all private employers that have 100 or more employees (anywhere in the U.S. as long as it has one employee in California) are required to file the California pay report, as it applies to employees. For example, an employer that had 10 employees inside California and 90 employees outside of California the employer would be required to submit a pay data report. An employer with 1,000 employees but with no employees in California would not be required to file a pay data report with the Civil Rights Department (CRD). When reporting to CRD, employers must include their employees assigned to California establishments and/or working within California, and employers may include their other employees. So, for example, if you are an employer with 95 employees inside California or reporting to California establishments, and 5 employees outside of California, you can choose to report on just the 95 employees who live or report to California locations, or you can include all 100 employees. 

 

We have (4) companies under single ownership; I would assume that our employee count would include all (4) companies but wanted to double check.

The current FAQs provide: “[T]he parent company may – but is not required to – submit a pay data report covering itself and its subsidiaries only if the companies legally constitute a single enterprise, such as through centralized ownership, control, or management. In such a filing, the parent company would be the “employer” in the Establishment and Employee Details section of the report, and Employer Info section would cover all of the parent company’s and subsidiaries’ establishments and employees being reported on (with the applicable FEIN and SEIN provided in the clarifying remarks field for each row). Alternatively, the parent company and subsidiaries may each submit its own pay data report. In such a filing by a subsidiary, for example, the subsidiary would be the “employer” in Employer Info section of the report (and the parent company would be identified in the specified fields in that section), and the Establishment and Employee Details section of the report would cover the establishments and employees of the subsidiary. If a parent company and its subsidiaries do not legally constitute a single enterprise, each company must file a separate report.”

 

Can we expand the reported population to beyond the jurisdiction (e.g., CA) to show that as a company our numbers are better than just a small employee group in CA?

Yes, per FAQs on the current pay reporting law, employers must include their employees assigned to California establishments and/or working within California, and employers may choose to include their other employees.  We encourage you to work with counsel to ensure you’re not creating any other risks by expanding the reported population.

 

Median and Mean Pay Gap

Is there any differentiation between full time and part time?

Under the current guidelines, part-time employees, including those who work partial days and fewer than each day of the work week, are counted the same as full-time employees with total earnings calculated based on Box 5 of the W-2 for each employee in the snapshot for the entire Reporting Year. It is unknown whether the median and mean pay gap will take into account the hours worked to calculate the median and mean hourly rate.

 

Does the pay gap reporting include bonuses as well?

The median and mean pay gap reporting is based on calculations using W-2 earnings, so it will include bonus compensation.

 

For median and mean: Is the median/mean pay gap applicable to those in CA only, all U.S., or the entire workforce (including international countries)? 

As noted above, the FAQs on the current pay reporting law provide that employers must include their employees assigned to California establishments and/or working within California, and employers may choose to include their other employees in the U.S.  We encourage you to work with counsel to ensure you’re not creating any other risks by expanding the reported population.

 

For the hourly earnings in the mean and mean pay gap, would overtime be included?

The calculation of the hourly rate is based on W-2 earnings, so overtime would be included.

 

This sounds similar to UK gender pay gap reporting; is it?

It is somewhat similar in that it is calculating total earnings as hourly rates that are then compared to one another, based on median and mean.  This is a trend we are seeing at Syndio, with more global cross-pollination of pay equity laws.  We expect to see more of this in the future.

 

Contractor Pay Report

What does the contractor pay report require?
The contractor pay report requirements are the least clear portions of CA SB 1162. 

The amendments provide that “a private employer that has 100 or more employees hired through labor contractors within the prior calendar year shall submit a separate pay data report to the department covering the employees hired through labor contractors in the prior calendar year” (emphasis added),  The law defines “employee” as “an individual on an employer’s payroll, including a part-time individual, and for whom the employer is required to withhold federal social security taxes from that individual’s wages.” (emphasis added).  Adding to the complication, the regulations currently exclude independent contractors from the definition of employee.  See Cal. Code Regs., tit. 2, §§ 11008(c)(1) (“Employee” does not include an independent contractor as defined in Labor Code section 3353.”)

Given this language, it is possible that the law could be interpreted in at least one of three different ways (other interpretations are also possible):

• • • • (1) The contractor pay report in CA SB 1162 will require reporting only on temporary workers who were directly hired through a staffing company (i.e., were “employees hired through a labor contractor”);
      • (2) The contractor pay report could be interpreted to include reporting on those who were directly hired OR converted (i.e., if the “employee hired through a labor contractor” is interpreted to include conversions, which often involves a separate hiring job posting and hiring process); or 
      • (3) The law could be interpreted to apply more broadly to all workers from labor contractors, given that the final version of CA SB 1162 was amended to say that the “labor contractor[s] shall supply all necessary pay data to the private employer”, which may not be necessary if it only applies to direct hires and conversions. However, this interpretation could be challenged.

Given the various interpretations available, there is a lot unknown about who is covered and what will be required.

Syndio is keeping an eagle eye on this and we expect more guidance from the State of California. Also, this is a tricky issue, so stay close in touch with your legal counsel.  

 

Are we reporting the contractor pay rate vs bill rate?

This also is not entirely clear. See answer to What does the contractor pay report require? above.  

As noted above, the law applies to private employers that have 100 or more employees hired through labor contractors and provides that “labor contractor shall supply all necessary pay data to the private employer.” But the law does not define exactly what will be reported or how compensation reported will be calculated. We expect more guidance from the State of California.

 

Are freelancers considered to fall under the contractor definition?

The law says that “labor contractor means an individual or entity that supplies, either with or without a contract, a client employer with workers to perform labor within the client employer’s usual course of business” (emphasis added). Seek legal guidance as to who is included.

 

Must all 100+ labor contractors be in CA, or is it 100+ labor contractors total, but only 50 CA contractors, for example?

It is unclear at this time whether this applies only to direct hires from labor contractors, includes conversions, or includes all workers supplied by the labor contractor.  See answer to What does the contractor pay report require? above.  

It is also unknown whether this will be similar to the employee report, which applies to employers with 100+ employees, so long as at least one is in California, such that if you have 95 or more employees hired through labor contractors in Oregon, and five in California, you will need to report on at least the five in California. 

We expect more guidance from the State of California. 

 

Please clarify, is the requirement that the labor contractor (i.e., staffing vendor) is to provide wage data to the companies to whom they are supplying contract workers/NPW?

CA SB 1162 requires that labor contractors “supply all necessary pay data to the private employer.”  However, it is uncertain, at this time, which data is required or for which people. See answer to What does the contractor pay report require? above. 

 

If you have contractors from multiple different staffing/temp agencies, and none of them have sent you 100 workers, but the total # of contractors you have in CA is over 100, do you need to get data from all the staffing agencies and consolidate and submit one report? (So even if a staffing agency only sent you 10 people, they might be required to comply?)

As noted above, this is not clear.  However, it is likely that the threshold will be combined across labor contractors.

 

Penalties

What are the penalties under the California pay scale disclosure requirements?

Penalties are steep, with penalties ranging from $100-$10,000, per job posting, though there is no penalty for the first violation if the employer can show that all job postings for open positions have been updated to include the pay scale.

 

What are the penalties under the California pay data reporting requirements?

If an employer does not file the report, a civil penalty not to exceed $100/per employee can be levied.  This penalty can increase to $200/per employee for subsequent failure to file. Further, CA SB 1162 also provides that if the employer is unable to submit a complete and accurate report because a labor contractor has not provided the pay data, the court may apportion an appropriate amount of penalties to any labor contractor that has failed to provide the pay data to the employer.

 

The penalties for the contractor reporting only count the employees who were not reported, correct?  If you send an incomplete report you just get fined on the missing ones?

The law does not anticipate this scenario. The penalties kick-in if an employer does not file the report. It is unclear if the penalties would apply, and if so how they would be calculated for employees missing from the report.

 

Trends and Implementation Best Practices

Are people moving to broadbanding or narrow ranges? Are you seeing any trends about what companies are doing when they have very wide pay ranges? Do they just post the wide range or consider a segment within the range with the appropriate caveats?

We are seeing a mix of broad and narrow ranges.  Some companies are choosing to display the full range within a job posting and then explaining that the job may be paid differently in the range depending on the location.  More organizations appear to be displaying ranges relevant to the job vs. the entire range.

 

What if a pay scale does not exist?

You still must include the pay range in the job posting. Companies must provide whatever guidance they are using — market data, a range based on what current employees are being paid, etc. — for the job posting.

 

What if you have multiple locations? For example, our company has locations in WA, CA, and CO, and uses location differentials. Do we need to post CO ranges in postings in WA and CA?

Some companies choose to post different ranges by location based on geographic differentials, as that reflects the market within which they are competing for talent.  They explain that this is how they define the market as part of their compensation philosophy.

 

Does the move to an opportunity equity focus imply that there should be no difference in pay between those in tech vs non-tech roles?

No, this is not required by CA SB 1162. The California law will still require that you pay people performing substantially similar work equitably. There is no new cause of action associated with median or mean pay gaps.  

At Syndio, however, we believe that employers can and should focus both on pay equity and on the opportunity gaps that appear in the median and mean pay gap statistics. Employers are already under immense pressure from employees, investors and stakeholders to close pay gaps and provide real DE&I commitments.  Forward-thinking companies often start by getting pay equity right. Paying employees equally for equal work is, for sure, a critically important first step. Without getting that foundation right, you cannot ever close the pay gap. 

But where there will also be a focus on median and mean pay gaps, this is not enough. Employers need to start assessing whether they’re creating diverse representation throughout all levels of their company, assessing how opportunities are made available, and whether women and BIPOC employees are concentrated in lower-paid segments of the business. This is not possible without a solution that assesses all your data instantly to help you see your diversity gaps. Gaps cannot be closed overnight; it takes dedication and consistent work to achieve and maintain pay and opportunity equity. If this legislation passes, equal pay for equal work will just be the floor in the U.S. Companies will need to show tangible progress toward parity and diversity across their entire organization. See our article What is the Median Pay Gap (And Why Should You Care?).  

 

What is the best source of salary market analysis?

There are a broad variety of compensation survey data sources available.  Employers typically use sources that best reflect how they define “the market” (that is, the industry and location within which they compete for talent). 

 

If you conduct a pay or opportunity analysis internally, isn’t there a risk to privilege?

No, not so long as the analysis is conducted at the direction of counsel for purposes of obtaining legal advice. Companies often use the Syndio workplace equity platform to conduct attorney-client privileged analyses. In fact, the vast majority of the analyses conducted using the Syndio platform are directed by counsel for the purpose of obtaining legal advice.  

 

Are there other companies that you are aware of outside of Microsoft that are going broader than state pay transparency law?

Yes, we are aware of several. In fact, Syndio is one of those companies.  We post the ranges for our openings nationwide. This Forbes article shares how, in the face of changing legislation and other pressures, 79% of surveyed companies said they are planning, considering, or already actively posting pay range data in locations where there is no legal requirement to do so. How can companies prepare for total pay transparency becoming the norm? Syndio’s Director of Pay Strategy & Partner Success Nancy Romanyshyn shares tips.

 

 

 

Have more questions about CA SB 1162?

 

Our experts answer them in the Ask the Experts: California’s Pay Reporting + Pay Disclosure Law webinar at the link below. 

 

 

The information provided herein does not, and is not intended to, constitute legal advice. All information, content, and materials are provided for general informational purposes only. The links to third-party or government websites are offered for the convenience of the reader; Syndio is not responsible for the contents on linked pages.