Understanding California’s New Pay Transparency Requirements

California continues to strengthen workplace protections through legislation aimed at promoting equality, fairness, and accountability. One of the most impactful updates in recent years is new pay transparency requirements, which expand employees’ rights and employers’ obligations regarding salary disclosure. These laws reflect the state’s commitment to addressing pay inequity and improving access to wage information across industries. The changes affect hiring practices, recordkeeping, and internal pay communication within organizations. Employers who fail to comply risk exposure to state penalties and potential civil actions.

The Foundation Of Pay Transparency Laws In California

California’s pay transparency framework builds upon long-standing anti-discrimination and equal pay laws. Under California Labor Code §432.3, employers are prohibited from asking job applicants about prior salary history and must provide pay scale information upon reasonable request. However, the latest amendments—implemented through Senate Bill 1162 (SB 1162), effective January 1, 2023, significantly expand these obligations.

SB 1162 requires employers with 15 or more employees to include the pay scale for any position in job postings. Employers must also provide existing employees with the pay range for their current position upon request. Additionally, businesses with 100 or more employees must file annual pay data reports with the California Civil Rights Department (CRD), detailing wage information by race, ethnicity, and gender for each job category.

These measures aim to expose and reduce pay disparities based on gender and other protected characteristics, ensuring greater wage equity and transparency throughout the state.

Employer Recordkeeping And Reporting Obligations

Under Labor Code §432.3(c), employers must maintain records of each employee’s job titles and wage rate history throughout employment and for three years thereafter. These records are critical in the event of a wage discrimination claim or state audit.

SB 1162 also expanded reporting obligations under Government Code §12999. Employers with 100 or more employees must submit annual reports that include:

• The number of employees by race, ethnicity, and gender within each job category.
• The mean and median hourly rates for each group.
• Wage data for workers hired through labor contractors, if applicable.

Failure to file accurate and timely pay data reports can result in penalties of up to $100 per employee for initial violations and $200 per employee for subsequent violations.

Who Is Covered Under The Law

The law applies broadly across California workplaces. Any employer with 15 or more employees is required to post salary ranges for advertised positions, including remote roles that could be performed within California. Employers with 100 or more workers must submit pay data reports, even if the business is headquartered outside the state but employs California residents.

Labor contractors, staffing agencies, and franchise operators are also subject to compliance when they employ or place California workers. Businesses that ignore these provisions risk not only administrative penalties but also reputational harm, as employees and applicants increasingly demand transparency and fairness in compensation practices.

How Pay Transparency Affects Hiring And Promotion Practices

The new pay transparency requirements reshape how hiring and promotions occur within California organizations. Employers must ensure that advertised salary ranges reflect realistic and equitable compensation levels. Inflated or arbitrary ranges can trigger scrutiny from state regulators or potential legal challenges.

Pay transparency also empowers employees and job seekers to assess opportunities more accurately. When applicants understand compensation expectations upfront, hiring processes become more efficient and less prone to wage inequality. Internal equity concerns are also more easily identified and corrected when employees have access to comparable pay information for similar roles.

Risks Of Non-Compliance

Employers who fail to comply with pay transparency laws face significant exposure. Under Labor Code §432.3(f), employees may file a complaint with the Labor Commissioner’s Office for violations related to pay disclosure. Penalties can range from $100 to $10,000 per violation, depending on the severity and whether corrective action was taken.

Beyond administrative penalties, non-compliance can contribute to pay discrimination lawsuits under California’s Equal Pay Act (Labor Code §1197.5). This law mandates that employees performing substantially similar work must receive equal pay, regardless of gender, race, or ethnicity. Employers that withhold pay scale information or submit incomplete reports may face additional liability if disparities are discovered.

Steps Employers Should Take To Comply

Employers seeking to comply with California’s pay transparency laws should consider implementing several best practices:

• Conduct comprehensive pay audits to identify disparities among similar positions.
• Establish standardized salary ranges for all roles before posting job openings.
• Train managers and human resources personnel on lawful pay disclosure requirements.
• Maintain complete and updated wage records for all employees.
• Ensure timely submission of pay data reports to the California Civil Rights Department.

Compliance is not only a legal requirement but also an opportunity to foster trust, fairness, and long-term employee retention. Transparent pay structures reflect ethical business practices and strengthen workplace morale.

The Broader Impact On Workplace Equality

Pay transparency laws represent a growing trend toward accountability in compensation practices. By enforcing disclosure and recordkeeping requirements, California aims to close persistent wage gaps across gender and racial lines. The legislation also reflects national momentum, as several other states—such as Colorado, New York, and Washington—have implemented similar pay equity frameworks.

Employers who embrace transparency benefit from greater employee satisfaction and reduced turnover. Clear pay practices also protect organizations from allegations of discrimination or bias. Over time, these regulations contribute to a more equitable and competitive job market across California.

California Pay Transparency Frequently Asked Questions

What Is Considered A Pay Scale Under California Law?

A pay scale refers to the salary or hourly wage range that an employer reasonably expects to pay for a specific position. Under Labor Code §432.3, employers must disclose this range in job postings and provide it upon request from current employees.

Do Small Businesses Have To Comply With Pay Transparency Requirements?

Employers with fewer than 15 employees are not required to include pay ranges in job postings. However, they must still comply with other provisions of the California Equal Pay Act, which prohibits discriminatory pay practices.

Are Remote Positions Covered By California’s Pay Transparency Law?

Yes. If a remote position could be performed by a California resident, the employer must include the pay scale in the job posting, even if the company is based outside the state.

What Penalties Apply For Failure To Post Pay Ranges Or File Reports?

Employers that violate pay transparency laws can face administrative penalties of up to $10,000 per violation under Labor Code §432.3(f). Additionally, failure to file pay data reports may result in penalties of $100 to $200 per employee under Government Code §12999.

Does Pay Transparency Apply To Bonuses And Commissions?

Employers must disclose base pay ranges but are not required to list potential bonuses or commissions. However, when variable compensation is a significant part of total pay, transparency about the structure and eligibility criteria can help avoid misunderstandings.

How Does SB 1162 Relate To California’s Equal Pay Act?

SB 1162 complements Labor Code §1197.5, which requires equal pay for substantially similar work. The new transparency rules ensure that employees and regulators can identify potential pay disparities more easily, supporting enforcement of equal pay laws.

Can Employees Sue If Pay Data Reveals Inequality?

If pay data exposes discriminatory practices, affected employees may bring claims under California’s Equal Pay Act or federal anti-discrimination laws, such as Title VII of the Civil Rights Act of 1964. Transparency laws make it easier to detect violations and hold employers accountable.

How Long Must Employers Keep Pay Records?

Employers are required to maintain job title and wage history records for each employee during employment and for three years after termination, as stated in Labor Code §432.3(c).

Call Law Office Of Joseph Richards, P.C. For A Free Consultation 

Employers and employees across California continue to adapt to the state’s evolving pay transparency requirements. Legal guidance can make the difference between compliance and costly penalties. Anyone seeking assistance with understanding or enforcing these obligations should contact the Orange County employment law attorney at Law Office of Joseph Richards, P.C. by calling (888) 883-6588 to receive your free consultation. The firm represents workers throughout California, ensuring fair treatment and protection of employee rights under state law.