A bill to increase pay transparency in California steps closer to becoming law.

Senate Bill 1162, introduced in February and with some amendments since its initial form, passed the Assembly Appropriations Committee on August 11. Only a few steps are left before it could become law this legislative session: (1) a full Assembly vote; (2) reconciliation with the Senate; and (3) the governor’s signature.

SB 1162 continues to focus on enhanced pay transparency. In its current form, the bill requires employers with at least 15 employees to include the position’s pay scale in any job posting, including those posted through a third party. This reflects larger pay transparency trends nationally, including the requirements in Colorado, New York City, and Washington. The California bill also requires employers to provide the pay scale for a position to applicants and employees upon request.

The bill no longer requires employers to provide employees notice of job opportunities before they are filled. This requirement has required significant process changes for employers in Colorado.

The bill also expands the pay data reporting obligations for California employers. Currently, California employers must submit to the Department of Fair Employment and Housing (now, the Civil Rights Department) a pay data report tabulating (A) the number of employees within each establishment (B) by race, ethnicity, and sex within each (C) job category (for example, Professionals, Technicians, Laborers, and Service Workers) (D) who earned within each of 12 specific pay band during the prior year.

If the current version bill passes, employers also will have to:

1. Report the median and mean hourly rate for each combination of race, ethnicity, and sex for each job category; and

2. Submit a separate pay data report for employees hired through labor contractors (i.e., covering temporary staffing agencies) that also discloses the “ownership names of all labor contractors used to supply employees.”

An employer that fails to submit these required reports could be subject to penalties of $100 per employee (or $200 per person for repeat failures).

In short, this bill (if passed) will force employers to face any pay gaps and diversity gaps in their workforces. While pay gaps may be addressed with pay adjustments and strong, fair compensation systems, gaps in diversity can require long-term planning with a concerted external and internal DEI strategy. Identifying and understanding these gaps — and their causes — may also help avoid situations in which discriminatory bias or other unlawful actions can create legal risk.