Over the next three months, recently passed laws requiring employers to include wage and salary ranges in job postings will take effect in California and New York City. These two jurisdictions join a growing number of states (including Colorado, Connecticut, Maryland, Rhode Island and Washington) and cities that now (or will soon) mandate that covered employers disclose wage ranges to job applicants and/or current employees. These laws are part of an ongoing effort by state and local legislatures to increase transparency around wages as a means to reduce the gender and race pay gap.

California

On September 27, 2022, California Governor Gavin Newsom signed SB 1162, which expanded existing requirements concerning (1) pay scale disclosure and (2) annual wage data reporting. The law will take effect on January 1, 2023.

Pay Scale Disclosure

Current California law requires that all employers provide the anticipated pay scale—the salary or hourly range that the employer reasonably expects to pay for a position—to a job applicant upon "reasonable request." Effective January 1, 2023, employers must also provide pay scale information to current employees upon reasonable request.

Additionally, the law creates new job posting requirements. Employers with 15 or more employees must include the same pay scale information (i.e., reasonably anticipated salary or hourly wage range) in all job advertisements. This requirement applies even where an employer engages a third-party recruiter to post job openings.

The law also imposes new record retention obligations. All employers must maintain records of each employee's job title and wage rate history during the duration of the employee's employment and for three years thereafter. These records are subject to inspection by the Labor Commissioner, who is authorized to review the data for a pattern of wage discrepancy.

Any person aggrieved by a violation of the law may bring a private cause of action against the employer for injunctive or other relief. Potential plaintiffs may include new hires who accepted a salary that was below the range the employer should have disclosed or even job searchers who opted not to apply for a position because the pay scale was not posted. In order to receive monetary relief, such individuals would need to establish they suffered damages due to the non-disclosure. Employers in violation of the pay disclosure requirements are also subject to civil fines ranging from $100 to $10,000 per violation. First-time offenders that update their job posting to be compliant with the law will not be penalized.

There are still some outstanding questions about California's new job posting requirement. For instance, it is unclear whether the 15-employee coverage threshold counts only California-based employees or whether it includes all employees worldwide. The law also does not address whether California employers need to include pay scale information for remote positions that can be performed by employees outside of California. We anticipate future guidance addressing these open questions.

Annual Wage Data Reporting

In addition to the applicant/employee pay disclosure requirements, the new California law expands annual wage data reporting obligations for large employers. Under the new law, California employers with 100 or more employees must submit annual pay data reports to the California Civil Rights Department containing demographic information about employees broken down by race, ethnicity and sex for specific job categories.1

The reports must include the following information about the prior calendar year:

  • The number of employees by race, ethnicity and sex in each job category.
  • Within each job category, for each combination of race, ethnicity and sex, the median and mean hourly rate.
  • The number of employees by race, ethnicity and sex whose annual earnings fall within each of the pay bands used by the U.S. Bureau of Labor Statistics in the Occupational Employment Statistics survey.
  • The total number of hours worked by each employee counted in each pay band during the applicable year.

Employers must submit the annual report each year on the second Wednesday in May, starting on May 10, 2023 (reflecting data from calendar year 2022). Private employers that have 100 or more employees hired through a labor contractor or staffing agency must submit a separate annual wage data report covering those contingent workers. In that report, the employer must disclose the ownership names of all labor contractors used to supply employees.

Failure to provide the required annual wage data reports could result in a civil penalty of $100 per employee for a first offense and $200 per employee for each subsequent offense. These penalties could be very costly for employers with a substantial number of employees.

New York City

After a monthslong delay, the New York City pay transparency law will take effect on November 1, 2022. The law amends the New York City Human Rights Law to require that employers post the minimum and maximum annual salary or hourly wage in any job advertisement publicized to a pool of applicants, including any internal notice of promotion or transfer opportunity.

According to guidance issued by the NYC Commission on Human Rights, the law covers all employers that have four or more employees, as long as at least one employee works in New York City. The pay disclosure requirement applies to any position that can or will be performed, in whole or in part, in New York City, including positions that can be performed from an employee's home. This means that an employer with at least one employee in New York City will be required to post wage information for fully remote positions. The disclosure requirements apply to advertisements for full- or part-time employment as well as advertisements seeking interns and independent contractors. The law, however, does not prohibit employers from hiring without using an advertisement or require employers to create a job posting in order to hire.

Employers must state the minimum and maximum wage ranges they in good faith believe they will pay for the job, promotion or transfer opportunity at the time of posting. Similar to the California law, the wage information required by the NYC ordinance includes only base annual salary or hourly wage and does not include other forms of compensation such as health insurance, expected bonuses or stock options.

Unlike under the California law, job candidates cannot bring a private cause of action against a business for a violation of the NYC job posting requirements. However, an employee may bring suit against their current employer for an alleged violation of the requirements concerning internal advertisements for promotion or transfer opportunities. In order to establish damages, the aggrieved employee would likely need to allege that they accepted a promotion or transfer at a salary lower than they otherwise would have if the pay range had been included in the advertisement. Alternatively, a current employee could allege that they failed to apply for a promotion or transfer opportunity for which they would have applied (and likely been selected) had they known the likely compensation was higher than that of their current position. The NYC Commission on Human Rights will investigate violations of the law and issue enforcement actions. The Commission will not assess a fine for a first-time violation, provided that the employer remedies the violation within 30 days. But employers are subject to civil penalties of up to $250,000 for an uncured first-time violation as well as for any subsequent violation.

The New York State Legislature passed a similar statewide pay transparency bill in June 2022, which is currently awaiting Governor Kathy Hochul's signature. If enacted, the statewide law would take effect 270 days after its execution.

Next Steps

Employers should ensure that all applicable job postings include the required pay scale information going forward. Large employers in California should also be prepared to submit to the California Civil Rights Department accurate wage data reports in May 2023.

Prior to these laws taking effect, employers should determine the salary ranges for existing positions and any position for which they anticipate posting advertisements. Employers may also consider conducting a pay equity audit for their current workforce and making any necessary pay adjustments in advance of having to publicly disclose such information.

Footnote

1. The job categories include (1) executive or senior level officials and managers, (2) first- or mid-level officials and managers, (3) professionals, (4) technicians, (5) sales workers, (6) administrative support workers, (7) craft workers, (8) operatives, (9) laborers and helpers, and (10) service workers.

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