As we previously reported, on September 27, 2022, Governor Gavin Newsom approved SB 1162 to significantly expand the pay data reporting and pay scale requirements for California employers. These requirements became effective January 1, 2023.

Pay Data Reporting

The deadline for submitting pay data reports for the 2022 reporting year is May 10, 2023. The California Civil Rights Department (CRD) has now released guidance and opened a reporting portal to assist employers with their submissions. The guidance provides answers to many of the outstanding issues relating to the who, what, and how of pay data reporting.

First, the guidance clarifies that any employer with 100 or more employees nationwide, and at least one employee in California, must complete a California pay data report. Employee means “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.” When completing their California pay data reports, employers must include all employees assigned to California establishments and/or working within California. This includes remote workers working in California and assigned to establishments outside of California. Employers should not report employees who are working outside of California and assigned to an establishment outside of California.

Second, the CRD has provided specific step-by-step instructions to follow in preparing and submitting pay data reports. Those steps are:

1. Determine whether the employer is required to file a Payroll Employee Report for Reporting Year 2022. If the employer is required to file, proceed through the following steps.

2. Determine the employer’s “Snapshot Period” to identify the employees who will be reported on. Employees assigned to California establishments and/or who work from California must be reported on.

3. Determine which establishments the employer has, and gather information about each establishment.

4. For all employees in the Snapshot Period, identify each employee’s establishment, job category, race/ethnicity, sex, pay, pay band, and hours worked.

5. Within each establishment, group employees who have the same job category, pay band, and race/ethnicity/sex combination. Some groups may be a group of one if no other employee in the establishment shares that employee’s job category, pay band, race/ethnicity, and sex.

6. Within each employee group in each establishment, calculate the total hours worked by the group.

7. Within each employee group in each establishment, calculate the group’s mean hourly rate and the group’s median hourly rate.

8. Gather additional information about the employer and its establishments, such as the employer’s address on file with the California Employment Development Department (EDD), total number of employees in the United States, total number of employees in California, Federal Employer Identification Number (FEIN), California Employer Identification Number (SEIN), North American Industry Classification System (NAICS) code(s), DUNS Number, and whether the employer is a state contractor.

9. Register in the portal and build the report. First, in the portal, provide information about the employer and, if relevant, its parent company, as well as information on all affiliated entities included in the report (Employer Info and Submission Info). Next, provide establishment-level and employee-level information (Establishment and Employee Details) by uploading an Excel file by using CRD’s template, uploading a . CSV file, or using the portal’s fillable forms.

10. Provide any clarifying remarks in the relevant field(s) and correct any errors identified by the portal.

11. Certify the final report and submit by May 10, 2023.

Third, the guidance addresses questions relating to labor contractor employees. The statute requires a private employer that has 100 or more employees hired through “labor contractors” (e.g., staffing agencies) within the prior calendar year to submit a separate pay data report to CRD covering those employees. The guidance clarifies that labor contractor employees located inside and outside of California are counted when determining whether an employer meets the reporting threshold. Part-time labor contractor employees, and labor contractor employees on paid or unpaid leave, are also counted. An employer must consider its labor contractor employees in the aggregate (i.e., from all labor contractors) in determining whether it meets the 100-labor contractor employee threshold. Labor contractor employees working in California and/or assigned to a California establishment should be included in the employer’s labor contractor employee report.

Pay Scale Requirements

As we previously reported, SB 1162 amends California Labor Code section 432.2 to require covered California employers to affirmatively provide pay scale information on job postings, including postings made by third-party job sites used to advertise positions. Covered employers must also provide pay scale information upon request to current employees for their current position.

New guidance issued by the California Division of Labor Standards Enforcement (DLSE) clarifies that the statute applies to all employers with 15 or more employees nationwide. The guidance also provides that the pay scale listed is the range the employer reasonably expects to pay for a position, but does not include any compensation or tangible benefits provided in addition to a salary or hourly wage. In other words, bonuses, tips, or other benefits do not need to be included in the pay range.

The new guidance also reiterates that failure to provide a pay scale on job postings as required can result in civil penalties of no less than $100 and no more than $10,000 per violation.