Special Alert for Employers with California-Based Employees

By: Jessica L. MacKeigan

On December 27, 2022, the California Labor Commission issued new guidance regarding the state’s new pay transparency law that became effective January 1, 2023, and stands to impact employers nationwide. Under the state’s expanded Equal Pay Act (“Act”) provisions, a covered employer must:

• Provide, upon request, an employee with the pay scale (i.e., salary or wage rate) for their current position;
• Include a pay scale in any job posting whether posted by the employer or a third party hired by the employer to advertise the job posting; and
• Maintain records of the job title and wage rate history for all employees for the duration of their employment and for three years after their employment ends.

See California Labor Code 432.3.

The newly issued guidance indicates the foregoing requirements apply to any employer with 15 or more employees nationwide with at least one employee located in California, whether working remotely or in-person.  It’s important to note that if an employer has more than one facility, all employees are counted, as well as out-of-state employees, for purposes of making the 15-employee calculation.

The state’s Labor Commission is authorized by the Act to assess penalties for violations ranging from $100 to $10,000. Plus, affected applicants and employees can file civil suits. It is therefore imperative that affected employers take steps to ensure compliance with these new requirements.

Consistent with the guidance, employers are recommended to update all job postings for positions that “may ever be filled in California, either in-person or remotely.” This includes nationwide postings. As well, employers need to update personnel records for their California-based employees, to ensure they have the required records and pay scale information at the ready in the event those employees request such information. An employee is considered based in California for work purposes if they work a majority of the time in California or if they have definite base of operations in California and perform some work in the state. See Ward v. United Airlines, 9 Cal.5th 732 (2020) and Oman v. Delta Air Lines, 9 Cal.5th 762 (2020) (addressing the geographic scope of analogous labor code provisions).

Clients and employers with questions about the California pay scale and record keeping requirements are urged to contact Walter Haverfield for more guidance.

Jessica MacKeigan is senior counsel at Walter Haverfield and focuses her practice on labor and employment. She can be reached at jmackeigan@walterhav.com or at 216.928.2928.