California continues to expand worker protections and aims to
increase pay transparency in the workplace. Closing out the
legislative session, California Governor Gavin Newsom recently
signed significant new legislation aimed at increasing pay
transparency and addressing employee off-duty cannabis use.
Pay Transparency for Equity Act (Senate Bill
("SB") 1162)
SB 1162, the Pay Transparency for Pay Equity
Act, amends California Government Code § 12999 and Labor Code
§ 432.3, to impose greater obligations on employers in the
area of pay transparency and equity in employment and hiring.
Increased Pay Data Reporting for Employees Hired Through
Contractors
Effective January 1, 2023, amended Government Code § 12999
expands pay data reporting requirements for private employers with
100 or more employees. In particular, SB 1162 requires employers to
submit a pay data report to the California Civil Rights Department
(formerly known as the California Department of Fair Employment and
Housing) on or before the second Wednesday in May of each calendar
year reflecting the mean and median hourly rates paid to employees
sorted by each combination of race, ethnicity, and sex. For
purposes of establishing the numbers required to be reported,
employers are required to create a "snapshot" that counts
all of the individuals in each job category by race, ethnicity, and
sex who were employed during a single pay period of the
employer's choice between October 1 and December 31 of the
prior calendar year.
In addition, SB 1162 requires private employers with 100 or more
employees hired through labor contractors within the prior calendar
year to submit a separate pay data report to the California Civil
Rights Department setting forth pay information regarding employees
hired through labor contractors in the prior calendar year. In
connection with this second report, employers must disclose the
ownership names of all labor contractors used to supply employees.
The statute mandates that the labor contractor supply all necessary
pay data information to the private employer.
SB 1622 also expands the scope of employers who are required to
submit pay data reports. While the prior version of Government Code
§ 12999 was limited to employers with 100 or more employees
who were required to file an annual Employer Information Report
(EEO-1) under federal law, the amended statute expands the reach of
the statute to all employers with 100 or more employees, regardless
of whether they are also required to file EEO-1 reports. (Although
the text of the statute does not specify whether employers should
only count California employees for purposes of the section, the
California Civil Rights Department has issued guidance that
Government Code § 12999 applies to employers who have 100 or
more employees anywhere in the United States as long as they have
one employee in California.)
In addition, under SB 1622, (a) an employer cannot submit a copy of
its EEO-1 report to the California Civil Rights Department in lieu
of a pay data report, and (b) employers with multiple
establishments are no longer required to submit a consolidated
report for all employees.
In addition to expanding employer reporting obligations, the
amended statute increases potential civil penalties for
non-compliance. Upon request by the California Civil Rights
Department, a court may impose a civil penalty not to exceed $100
per employee on any employer who fails to file the required report
and a civil penalty of up to $200 per employee on any employer for
a subsequent failure to file the required report. The penalties
would be payable to the Civil Rights Enforcement and Litigation
Fund. If the employer's failure to provide a complete and
accurate report is attributable to the labor contractor's
failure to provide requisite pay data, the court may apportion an
"appropriate" amount of penalties to the any labor
contractor, although "appropriate" is not defined in the
statute.
Increased Pay Transparency in Employment and
Hiring
The Pay Transparency for Pay Equity Act also amends Labor Code
§ 432.3, which required employers to provide pay scale
information to job applicants upon reasonable request and
prohibited employers from relying on salary history information for
job applicants when deciding whether to offer employment and
seeking salary history information from job applicants.
Under the amended statute, effective on January 1, 2023, employers
must provide current employees with the pay scale for their current
positions upon request. In addition, SB 1162 also requires
employers with 15 or more employees to include in all job postings
the pay scale for the advertised position. If these employers
engage a third party to announce, post, publish, or otherwise make
known a job posting, they must provide the pay scale to the third
party, and the third party must include that pay scale in the job
posting. "Pay scale" is defined as the salary or hourly
wage range that the employer reasonably expects to pay for the
position.
The amended statute further requires employers to maintain records
of job title and wage rate history for each employee for the
duration of their employment plus three years thereafter. These
records are open to inspection by the labor commissioner and
failure to keep these records results in a rebuttable presumption
in favor of the employee's claim.
Employees who claim to be harmed by a violation of the section are
permitted to file a written complaint with the Labor Commissioner
within one year after learning of the violation. The complaint must
state the name and address of the employer and provide a detailed
account of the alleged violation. If a violation is found, the
labor commissioner is authorized to order the employer to pay a
civil penalty of between $100 and $10,000 per violation. Civil
penalties collected pursuant to the section will be deposited into
the Labor Enforcement and Compliance Fund for distribution to the
Division of Labor Standards Enforcement.
The statute also builds in a private cause of action for injunctive
relief and "any other relief the court deems
appropriate."
Finally, the statute includes a safe harbor provision for
first-time violations of the statute's new requirements for
providing and posting the pay scale for employees and job
applicants. No penalty will be assessed for first-time violations
if the employer demonstrates that all job postings for open
positions have been updated to include the requisite pay scale
under the section.
Assembly Bill ("AB") 2188
Protection for Off-Duty Employee Cannabis
Use
Effective January 1, 2024, AB 2188 will prohibit employers from
discriminating against an applicant or employee based on (1) the
person's use of cannabis off the job and away from the
workplace or (2) an employer-required drug screening test that has
found the person to have nonpsychoactive cannabis metabolites in
their hair, blood, urine, or other bodily fluids.
While recreational marijuana use has been legal in California since
2016 and use of marijuana for medical purposes has been legal since
1996, the California legislature had not created employment
protections for marijuana users, including medical marijuana use.
Furthermore, in 2008, the California Supreme Court had ruled that
the California Fair Employment and Housing Act did not require
employers to accommodate the use of medical marijuana, in part
because marijuana is prohibited under federal law. With this new
statute, which will be codified as Government Code § 12954,
California joins an increasing number of states in prohibiting
employers for taking action against employees for off-duty
marijuana use, regardless of whether the use is for medical
purposes.
AB 2188 exempts from its protection employees in the building and
construction trades and applicants or employees hired for positions
that require a federal government background investigation or
security clearance in accordance with federal regulations. In
addition, the law does not preempt state or federal laws requiring
applicants or employees to be tested for controlled substances.
Notably, however, the statute does not include an exception for
safety-sensitive positions, including positions requiring the
employee to drive as a regular part of their duties.
Additionally, employers are not prohibited from taking action in
hiring, or any term or condition of employment, if an employee
fails a drug test that does not screen for nonpsychoactive cannabis
metabolites, such as impairment tests that measure an individual
employee against their own baseline performance, and tests that
identify the presence of THC in an individual's bodily
fluids.
The new law also makes clear that nothing in the law permits an
employee to possess, be impaired by, or use cannabis on the job.
Nor does it affect the rights or obligations of an employer to
maintain a drug- and alcohol-free workplace under state or federal
laws or regulations.
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