What is SB 1162 and How to Comply
What is SB 1162?
SB 1162, also known as the Pay Transparency for Pay Equity Act, is a new California law that requires companies with more than 100 employees to report pay data from May 2023 and provide pay scales from January 2023. The law aims to provide transparency around gender, ethnicity, and race-based pay disparities and to prevent new disparities from occurring during the hiring process.
The new law builds on the existing pay data reporting requirements of SB 973 by dramatically increasing the number of companies that will need to comply, expanding reporting requirements, and mandating transparency around pay scales.
When are SB 1162 reports due?
California’s new pay transparency act, SB 1162, requires that employers file their first pay data report on or before May 10, 2023. Reports will be due on the second Wednesday of May each year thereafter.
Which companies are required to report pay data?
If you have more than 100 employees and at least one is employed by an establishment in California, you are required to comply with the reporting requirements of SB 1162. This is irrespective of where your HQ is based.
Employers are required to report sex, race, and ethnicity per job category and pay band. This is likely to create a significant reporting burden for companies.
Manually compiling pay data is likely to take you more than two weeks. A faster and more reliable alternative is Praisidio’s free Pay Gap Report Generator. Simply plug it into your HCM system and receive real-time pay gap data for all your employees.
Which companies are required to provide pay scale transparency?
All employers with more than 15 employees are required to include pay range in every job posting. If you have less than 15 employees, you are only required to provide applicants with a pay range on request.
All employers, regardless of size, are required to provide employees with their pay scale upon request.
These requirements come into effect from January 1st, 2023.
Do companies outside California have to comply?
If your company is based outside of California, but you have at least one employee working for an establishment in California, you are required to comply with pay data reporting requirements.
For employers in this situation, you are not required to report on all your employees. You can choose to report pay data just for those employees working for an establishment in California.
All companies based out-of-state that wish to hire in California are required to disclose pay ranges.
What information must be reported?
When you file your SB 1162 pay data report, you are required to submit a snapshot of all current employees taken during a pay period of your choice, between October 1st and December 31st of the reporting year.
Specifically, your SB 1162 report must include the sex, ethnicity, and race of employees per job category and pay scale.
The ten categories of jobs upon which you will need to report are:
- Executive or senior level officials and managers
- First or mid-level officials and managers
- Sales workers
- Administrative support workers
- Craft workers
- Laborers and helpers
- Service workers
The pay bands you’ll need to report on are those defined by the U.S. Bureau of Labor Statistics in its Occupational Employment Statistics Survey.
When categorizing employees by race and ethnicity, you are required to use the following categories:
- Non-Hispanic/Latino White
- Non-Hispanic/Latino Black or African American
- Non-Hispanic/Latino Native Hawaiian or Other Pacific Islander
- Non-Hispanic/Latino Asian
- Non-Hispanic/Latino American Indian or Alaskan Native
- Non-Hispanic/Latino Two or More Races
Sex of your employees can be categorized in one of three categories:
SB 1162 reporting template
For an easy to use overview of what to include in your report, see the CRD results overview. To build your own reporting template, scroll to the bottom and download any of the reports. The data shown in these reports is the same data you’ll be required to report in your own pay data report.
Should multiple establishments be reported separately?
SB 1162 requires that employers with multiple establishments provide pay data reporting for each establishment separately. Employers with more than 100 employees must report on all establishments, regardless of the size of each establishment.
While multi-establishment employers are required to submit individual data for each establishment (not aggregated), the actual data must be submitted to the CRD in a single report.
Do I need to file a pay report for remote workers?
For employers with one establishment in California (and more than 100 employees), it is required that pay data is filed for all employees, including remote workers. The same is true for multiple-establishment employers.
For multiple-establishment employers with establishments in and out of the state, it is only required to report on the remote workers associated with in-state establishments.
Do I need to file a pay report for contractors?
The law states that you need to include temporary workers provided by a staffing agency or independent contractors in your pay data reporting when they meet the following definition:
“An individual on an employer’s payroll, including a part-time individual, whom the employer is required to include in an EEO-1 Report and for whom the employer is required to withhold federal social security taxes from that individual’s wages.”
It’s worth noting that the wording used in this section of the act is potentially open to interpretation, so we advise that you double-check with your legal counsel before making any decisions.
How to submit pay data reports to CRD
Your pay data report must be submitted through the CRD’s California Pay Data reporting portal: https://pdr.dfeh.ca.gov. The CRD states that will not accept submission by email or hard copy.
To submit your report, you must first register in the portal. You can then submit your report by uploading an Excel file (based on the CRD’s template), uploading a .CSV file, or filling in a form on the portal.
What are the record-keeping requirements?
Employers are required by SB 1162 to keep a record of job title and wage rate history for each employee for the period of their employment. You must also keep their records for an additional three years after the end of employment.
Are there any ways to get around SB 1162?
If you already have employees in Calfornia, SB 1162 cannot be dodged. If you don’t yet have employees but are planning on hiring, the only way to avoid SB 1162 is to hire in other states (like many employers did when a similar law was passed in Colorado). However, given the size of California and its vast labor pool, hiring elsewhere is likely to be a impractical for most.
It’s also worth noting that SB 1162 is likely that start of a widespread trend towards pay gap reporting. It’s likely in the future that you’ll be required to report the same or similar data in multiple states, so it may pay to get organised early and begin analysing pay gaps regardless of where your employees are based.
What are the penalties for not complying with SB 1162?
If you don’t report your employee pay data (when required) you will face a civil penalty of up to $100/employee. Subsequent failures to file can cost up to $200/employee.
If you fail to disclose pay scales (when required) you will be penalized with a fine ranging from $100 to $10,000 per job posting. However, if it is your first violation and you can prove that all job postings have been updated in accordance with the act, then no fine will be given.
Didn’t Californian companies already have to report pay data?
Since SB 973 was enacted in law in September, 2020, California companies have had to report pay and hours-worked data by establishment, job category, sex, race, and ethnicity. SB 1162 goes a step further by requiring more employers to comply and adding median and mean pay gap reporting.
SB 973 was applicable to far fewer employers than SB 1162 as it only pertained to companies with more than 100 employees that had to submit an EEO-1 report annually. SB 1162 scraps the EEO-1 requirement and states that any private employer with more than 100 employees must submit an annual pay data report.
What’s the quickest way to make a pay data report?
Manually compiling pay data takes the average company more than two weeks and involves laborious analysis of multiple systems and extensive data entry.
Generating your pay gap report with the free Praisidio Pay Gap Report Generator is a far quicker and more efficient way to compile your data, saving you weeks of work.
The free Pay Gap Report Generator plugs directly into your HCM and gives you real-time analysis of pay gaps by sex, race, and ethnicity. This not only enables you to instantly generate reports but gives you up-to-date analysis throughout the year to help you mitigate pay gaps and proactively retain more employees.
The information provided on this page does not, and is not intended to, constitute legal advice. All information, content, and materials are provided for general informational purposes only. Please check with your legal counsel for specific advice.