A groundbreaking new law will require California employers with 100 or more employees to comply with new payroll reporting requirements that are intended to reveal whether employees are being treated differently because of their race, ethnicity, or sex.
Senate Bill 1162, by Monique Limon (D-Santa Barbara), was signed into law by Gov. Gavin Newsom on Sept. 27, 2022, and takes effect on Jan. 1, 2023.
The bill forces employers to include mean and median pay data for certain demographic categories, and makes California the first jurisdiction to mandate employers to assess the distribution of employees within their organization by demographics. The legislative intent behind the bill was focused on ensuring that certain demographic groups are represented in higher-paying and executive roles within an organization.
Let’s recap what is already required in California for employers with at least 100 employees. Employers are currently required:
- to send the state’s Civil Rights Department with the Business, Consumer Services, and Housing Agency pay data annually for existing employees, and
- to disclose the pay scale to job applicants upon “reasonable request” for same
The bill does not change these requirements. However, SB 1162 would now provide penalties for employers who employ over 100 employees if the employer fails to file the requisite reports or to make the mandatory disclosures.
Employees who are aggrieved by a violation of this new law have the recourse of filing a complaint with the Labor Commissioner or in civil court via injunctive relief or other relief as deemed appropriate by the court.
SB 1162 requires California based employers with 15 or more employees to disclose pay scales in job postings. Should a current employee request the pay scale, the bill requires employers to disclose that to the employee.
For employers with 100 or more employees, the company is required to report to the state:
- job categories
- pay data for each category
- the median and mean hourly rate for each combination of race, ethnicity, and sex within each job category
These employers must also submit to the state these pay reports irrespective of whether or not the employer is required to file an EEO-1 report. The reporting deadline is the May 10, 2023 for the calendar year 2022 pay data.
Further, companies with 100 or more employees are required to maintain a record of each and every employee’s wage history and job title during the employee’s employment at the company and for three years thereafter.
Surprisingly, SB 1162 is silent on whether or not the bill applies to remote job postings, especially since many California employers still offer remote work opportunities for job applicants.
We can anticipate many arguments in favor of and against this bill. One opinion is that the bill has the potential to encourage mediocre performance depending on how businesses implement it.
Top performers, irrespective of their demographics, still need a way to be incentivized. Usually businesses reward top performers with merit-based bonuses. SB 1162 does not make clear that merit-based bonuses are regulated within the new law.
There are civil financial penalties for non-compliance with filing pay data reports. The initial failure is up to $100 per employee, and $200 per employee for subsequent failures to file.
To recap, here are some of the most important reporting requirement takeaways from SB 1162:
- Calendar the May 10, 2023 deadline to submit reports based upon the calendar year 2022 pay data
- Employers with multiple establishments must submit a report for each establishment
- Employers with 100 or more employees hired through labor contractors must produce data on pay, hours worked, race/ethnicity, and gender information in a separate report
- For each job category, employers must report the median and mean hourly rate by each combination of race, ethnicity and sex.
We recommend you consult your legal and human resources teams to ensure compliance with the new payroll reporting laws. Bradford & Barthel will continue to monitor SB 1162’s progress and implementation and will provide updates as additional information becomes available.
Brittany Rothe-Kushel, Esq. is a partner at Bradford & Barthel’s Los Angeles location, where she aggressively defends against workers’ compensation claims and trains clients on the latest legal defense strategies. Please feel free to contact Brittany at email@example.com or at (310) 981-5004.
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