California Salary Transparency Law – Here’s how it works

California’s salary transparency law requires many employers with 15 or more employees to include a pay range in their job postings. It also allows you to request a pay range for your own position.

Employers have to provide state regulators with data about the pay they offer. If the law is violated, you can file a complaint with the Labor Commissioner’s Office or file a lawsuit in civil court.

California’s pay transparency law

Senate Bill 1162 (SB 1162) is California’s pay transparency and salary disclosure law. It became effective January 1, 2023. The law:

• requires large California employers to submit a report of pay data to the California Civil Rights Department (CRD),
• requires many employers to include a pay scale or wage range in their job postings,
• allows workers to request the pay scale for their current position,
• lets job seekers and applicants request the pay scale for the job they are considering,
• requires employers to keep records of job titles and pay history for its employees, and
• forbids employers from asking job applicants about their wage history.¹

The law mirrors salary disclosure and pay equity laws in other jurisdictions, including:

• New York,
• Colorado, and
• Washington.

Salary ranges for job postings

The most prominent requirement of SB 1162 is that employers provide a pay scale for jobs that they post. The job posting requirements of SB 1162 apply to employers that have 15 or more employees.² Smaller employers must provide pay scales to job applicants who request one.³

According to the law, a “pay scale” is the salary or the hourly wage that the employer reasonably expects to pay for the position. Note that another term for pay range or pay scale is “pay band.”

Employers cannot get around this requirement by using a third party to do their hiring for them. If they use a third-party hiring service, employers must provide the pay scale to that service, which then has to include the information in the posting.⁴

Employers who fail to include pay ranges face civil penalties of $100 to $10,000 by the California Labor Commissioner. Though a first-time violation carries no penalty as long as the employer adds in the pay range after being notified.⁵

Benefits of pay transparency

Pay transparency is required to ensure that wage disparities or discrepancies are detectable.⁶ It seeks to end wage discrimination and pay gaps that are based on protected classes like:

• race,
• ethnicity,
• sex, or
• gender.

The new salary disclosure law also gives workers the information they need early in the application process.⁷ It helps them make an informed decision about their future.⁸

Record-keeping and disclosure requirements

All employers have to keep records of job title and wage rate histories for all of its employees. These records must be retained for the duration of the worker’s employment, plus three years.

These records must be made available for inspection by the Labor Commissioner’s Office at the California Division of Labor Standards Enforcement (DLSE).⁹ Failing to keep these records creates a rebuttable presumption against the employer if an employee files a claim against them.¹⁰

Large employers

Large private employers in California (with 100 or more employees) have to submit their pay data annually to the CRD by the second Wednesday of May.¹¹ Their pay data report must include the:

• number of employees by race, ethnicity, and sex during a single pay period from the last quarter of the prior year who worked in the following job categories:
  • executive officials or senior managers,
  • first or mid-level managers and officials,
  • professionals,
  • technicians,
  • sales workers,
  • administrative support workers,
  • craft workers,
  • operatives,
  • laborers and helpers, and
  • service workers;
• median and the mean hourly rate for each combination of race, ethnicity, and sex for each job category,
• number of employees by race, ethnicity, and sex whose wages are within the pay bands used in the Occupational Employment Statistics survey by the U.S. Bureau of Labor Statistics,
• total number of hours worked by each employee in each pay band, and
• employer’s North American Industry Classification System (NAICS) code.¹²

Requirements and confidentiality

The information must be provided to the CRD in a format that is easily searchable and sortable.¹³ Any information in the report that could identify an individual is confidential.¹⁴

DLSE and CRD employees are forbidden from releasing such personal information.¹⁵ The CRD, however, can release reports to the public using non-personal information in the data.¹⁶ It keeps the data for at least 10 years.¹⁷

Employers who hire 100 or more employees through labor contractors in the prior calendar year have to submit a separate pay data report that covers these other employees.¹⁸ A “labor contractor” is someone that supplies workers for the employer’s usual course of business.¹⁹

Penalties

Failing to submit the report can lead to penalties for covered employers.²⁰ The CRD can get an injunction, or a court order, to force compliance. The employer may have to pay for the costs of obtaining the order.²¹ Employers can also face a civil penalty of up to:

• $100 per employee for a first failure to submit the annual pay data report, and
• $200 per employee for a subsequent violation.²²

Job applicants’ wage history

California SB 1162 also forbids all employers from seeking a job applicant’s salary history.

Employers cannot ask about your prior compensation or other benefits orally or in writing, and cannot have an agent ask on their behalf.²³ They cannot use salary history information as a factor in determining whether to offer you the job or how much to pay you for it.²⁴ They can only ask what your salary expectation is for the job.²⁵

This does not apply to people who currently work for the employer.²⁶ If you are applying for a different job with your current employer, your salary history can be used.

If you voluntarily disclose your salary history to a potential employer without their solicitation, they can use that information when offering a salary.²⁷

What can I do if the law is violated?

If your employer or a potential employer is violating California’s law on salary disclosure, you can:

• file a claim with the Labor Commissioner at the DLSE, and/or
• file a lawsuit.²⁸

If you file a claim with the Labor Commissioner, the office will investigate your allegations. Your claims must be filed within 1 year.

If the Commissioner finds a violation, a civil penalty of between $100 and $10,000 per violation can be imposed. However, if the violation was for not providing a pay scale and it was the employer’s first violation, no penalties will be assessed if the company comes into compliance with the law.²⁹

You can also file a lawsuit against your current or prospective employer. This lawsuit can demand injunctive relief in the form of a court order to comply with the salary disclosure law. You may also be able to recover compensation for your other losses.³⁰

Getting the legal advice of an attorney from a reputable law firm can help you decide how to best move forward.

Additional reading

For more in-depth information, refer to these scholarly articles:

• Equilibrium Effects of Pay Transparency – Econometrica.
• Gender, Pay Transparency, and Competitiveness: Why Salary Information Sometimes, but Not Always, Mitigates Gender Gaps in Salary Negotiations – Group Decision and Negotiation.
• Does Transparency Lead to Pay Compression? – Journal of Political Economy.
• Pay Transparency and the Gender Gap – American Economic Journal: Applied Economics.
• The new age of pay transparency – Business Horizons.