California Labor Agency Posts FAQs Relating to New Pay Scale Posting Requirements

Employers posting jobs to be filled in California must now include a pay range in the posting under new requirements that took effect at the beginning of 2023. Senate Bill (SB) 1162, which was signed by Governor Gavin Newsom in September 2022, seeks to address racial and gender pay disparities by requiring employers to post pay ranges in job postings and expanding employers’ pay data reporting obligations with the California Civil Rights Department (CRD). In December 2022, the California Department of Industrial Relations (DIR) released updated guidance for employers regarding the compliance with the new pay transparency obligations. Below is an overview of the pay transparency requirements, now found in California Labor Code section 432.3.

Pay Transparency

As of January 1, 2023, employers with fifteen or more employees must include a pay scale in a job posting. If the employer uses a third-party recruiter, the employer must provide the recruiter with the pay scale for the sought position, and the recruiter must include this in any job posting.

SB 1162 did not specify how an employer counts fifteen or more employees. The California Labor Commissioner, which is charged with enforcing the pay scale requirements, has interpreted this requirement to mean the employer has at least 15 employees located anywhere, provided that at least one of them is currently located in California.

The law also does not specify which posted positions are subject to the California law. The California Labor Commissioner has interpreted this requirement to mean that the pay scale must be included in a job posting for any job that could be filled by a person residing in California, even if remotely.

Employers subject to pay scale posting requirements in other states have considered complying with the California requirement by providing a link to the salary information in an electronic job posting or providing a quick response (QR) code in a paper posting that directs the reader to the salary information. The California labor commissioner has expressed the opinion that such links will not suffice in California. Instead, the specific pay scale must be included within the actual job posting, according to the DIR.

Pay Scale

Section 432.3 defines “pay scale” to mean the salary or hourly wage range that the employer “reasonably expects to pay for a position.” What if the employer will pay only one fixed rate for the role (e.g., the minimum wage)? According to the DIR, an employer that “intends to pay a set hourly amount or a set piece rate amount” for the position rather than a pay range, may comply with the requirement by providing the dollar amount of “that set hourly rate or set piece rate.”

The agency states that some forms of compensation other than a salary or hourly rate must also be posted. California Labor Code section 200 allows employers to pay employees on a task, piece, or commission basis, and if the hourly or salary wage is based on such forms of pay, then the job posting must include the “piece rate or commission range the employer reasonably expects to pay,” according to the DIR. The agency’s FAQ on this topic is ambiguous; it does not explain what it means to “base” an “hourly or salary range” on a piece rate or commission.

Any compensation or tangible benefits provided in addition to a salary or hourly wage are not required to be posted. Employers are not required to include “bonuses, tips, or other benefits” as part of the pay scale, though employers may include this information as part of their recruitment efforts.

Penalties

Under the law, a person who claims to have been “aggrieved” by an employer’s failure to follow the pay scale requirements may file a written complaint with the labor commissioner within one year of learning of the violation. The labor commissioner must investigate allegations and if it finds a violation, the labor commissioner may impose civil penalties of no less than $100 and up to $10,000 per violation. For a first-time violation, employers may not be assessed a penalty if the employer demonstrates that “all job postings for open positions have been updated to include the pay scale as required by this section.”

In addition, under the law, a person who claims to have been aggrieved by a violation of the requirements may also bring a civil action seeking an injunction or any other relief that a court “deems appropriate.”

Key Takeaways

California joined a growing list of states and jurisdictions that are seeking to tackle pay equity through pay transparency laws, placing additional compliance burdens on employers. Specifically, California’s SB 1162 requires covered employers to include the pay scale that they reasonable expect to pay for a position within a posting advertising to fill that position. Employers may want to consider reviewing their hiring practices and agreements with third-party recruiters to ensure compliance with the new pay scale posting requirements. Our recent article “California’s New Pay Transparency Law: Pay Data Reporting Obligation Changes for 2023” has more details on the pay data reporting requirements.

Ogletree Deakins will continue to monitor and report on developments with respect to California’s pay transparency law and will post updates on the firm’s California and Pay Equity blogs. Important information for employers is also available via the firm’s webinar and podcast programs.