California’s new pay transparency and pay scale disclosure applicable to startups and small businesses
On September 27, 2022, California Governor Gavin Newsom signed Senate Bill 1162, a broad pay transparency bill requiring employers to include pay ranges in all job advertisements effective January 1, 2023. California follows Washington (effective January 1, 2023), Colorado (currently in effect) and New York City (effective November 1, 2022) in this regard.
California businesses historically were required to provide the pay scale (i.e., the salary or hourly wage range) only upon request by an applicant who completed an initial interview. The newly revised Labor Code section 432.3 maintains that applicant disclosure requirement and adds that, upon a current employee’s request, covered employers will be required to provide the pay scale the employer reasonably expects to pay for such employee’s currently-held position.
Second, California businesses with 15 or more employees will also be required to include an open position’s pay scale, meaning the salary or hourly rate an employer reasonably expects for the position, in any job posting, whether the employer itself posts the job or engages a third party service provider to post and manage job postings. For companies who are headquartered abroad or in another states, experts are advising that if those companies have a single employee in California then they would likely be subject to the rules here, and should use the total national/international employee count to assess if the company's employee count is above 15, out of an abundance of caution.
Third, the new law also imposes record-keeping requirements on all businesses, regardless of size, and so businesses must maintain job title and salary history for all employees during their employment and for three (3) years thereafter.
The law establishes a new private right of action for injunctive and other relief, and there are civil penalties for violations of this statute. An aggrieved individual may file a written complaint with the Labor Commissioner within one year from the date they learned of the violation -- not when the violation may have occurred. Technical violations of the new pay scale requirements could lead to penalties up to $10,000 per violation, but thankfully, the first penalty will not be assessed if the business has demonstrated they have cured the job posting violation by updating it to include the pay scale.
Smith Shapourian Mignano PC is available to answer any questions or concerns you may have regarding your compliance with the newly revised Labor Code section 432.3.
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