Becker LLC – California’s New Pay Transparency Directly Impacts Staffing Industry

By Christina Abreu, Esq

In 2020, California enacted SB 973, which obligated employers with 100 or more employees to submit an annual pay data report to the California Civil Rights Department (“CCRD”). The new law, SB 1162 (recently signed by Governor Newsom), expands the reporting requirements to employers that reach the 100 employee threshold to include employees “hired through labor contractors.” Staffing agencies are directly impacted by this law as a labor contractor is defined “as an individual or entity that supplies, either with or without a contract, a client employer with workers to perform labor within the client employer’s usual course of business.” Thus, private employers with 100 or more employees, including employees hired through staffing agencies, must submit a separate pay data report to the CCRD. The first report is due on May 10, 2023.

Additionally, SB 1162 requires employers to submit a pay data report that includes the median and mean hourly rate for each combination of race, ethnicity, and sex within each job category. As such, staffing agencies must provide this information directly to the private employer in order for the employer to comply with the law.

Failure to adhere to the aforementioned requirements can result in civil penalties if an employer fails to file the required report. A staffing agency may also be penalized if an employer is unable to submit a complete report because of missing pay data from the staffing agency. These penalties include fines of up to $100 per employee for initial failures to file and up to $200 for subsequent failures to file.

However, SB 1162 is not done there. Effective January 1, 2023, there are also new pay transparency provisions that will impact most employers, including staffing agencies. Employers (1) must provide an employee the pay scale for his/her current position upon request; (2) Employers with 15 or more employees will have to include the pay scale for a position on any job posting; and (3) Employers must maintain records of a job title and wage history for each employee, which may be inspected by the Labor Commissioner. The foregoing specifically applies to staffing agencies as an employer with 15 or more employees that engages a third party to announce, post, or publish a job posting, which is required to publish the pay scale on each job posting.

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