Between today and September 30, 2022, Governor Newsom is expected to sign SB 1162 into law. SB 1162, which was first proposed in September 2020, will expand pay transparency in California by requiring increased reporting of hourly wages and salaries. The purpose of SB 1162 is to provide more pay transparency to potential employees while also seeking to reduce or eliminate pay or diversity gaps based on race, ethnicity, and gender.

All employers would be required to provide a pay scale for a current employee’s position at the employee’s request. Currently, employers only need to provide a pay scale to potential candidates for employment upon request. In addition, all employers would be required to report the median and mean hourly rate by each combination of race, ethnicity, and gender for each job category. Failure to report such information could result in a fine of $100 per employee for a first offense and up to $200 per employee for additional offenses.

The effect of the law will depend on the specific employer, with some provisions of the law dependent on the number of employees a company has. Employers with more than fifteen employees would be required to include a pay scale in all job postings, including jobs posted by third parties. An employer who fails to include a pay scale would not be punished for a first violation but would be required to update all job postings to include the pay scale. Any violation after the first violation could result in a fine between $100 and $10,000.

Employers with more than one hundred employees who were hired by labor contractors (i.e., staffing agencies) would be required to produce a separate report with data on pay, hours worked, race, ethnicity, and gender information. This report would be submitted to the California Civil Rights Department.

The enactment of SB 1162 could lead to potential lawsuits against employers who appear to have significant pay or diversity gaps based on the data reported under the law. In addition, it could also impact the hiring of new employees because job postings would require the inclusion of pay scale information. Employers should begin reviewing their pay and diversity data in anticipation of this law to ensure compliance and prevent penalties or litigation.