New California Law Requires Pay Rate Disclosures to the State and to Staffing Clients

Pay transparency legislation creates significant administrative burden for California employers, with a special twist for staffing firms.

Last week I reported on the salary posting requirements being enacted by some states, including California. The California law, known as Senate Bill 1162, contains a less-publicized requirement that many staffing firms will soon learn about when some of their California clients start asking them for data about their California temporary workers, including the workers’ pay rate. This means that these clients will get to see your gross profit margins in the name of pay transparency.

SB 1162 starts by requiring all employers with a California presence (even one employee) and over 100 total employees (anywhere) to submit a pay data report to the California Civil Rights Department (“CRD”). The report must cover employees working in California establishments, working within California or remote workers reporting a California establishment. Otherwise, the report does not include out of state workers.

The law requires covered employers to calculate and report the mean and median hourly pay rates of their W-2 employees by establishment (location in California), job category, race/ethnicity, and sex during a single pay period in the fourth calendar quarter. The job categories are:

• Executive or senior level officials and managers
• First or mid-level officials and managers
• Professionals
• Technicians
• Sales workers
• Administrative support workers
• Craft workers
• Operatives
• Laborers and helpers
• Service workers

The race/ethnicity categories are the same as found in the EEOC’s EEO-1 report:

• Hispanic/Latino
• Non-Hispanic/Latino White
• Non-Hispanic/Latino Black or African American
• Non-Hispanic/Latino Native Hawaiian or Other Pacific Islander
• Non-Hispanic/Latino Asian
• Non-Hispanic/Latino American Indian or Alaskan Native
• Non-Hispanic/Latino Two or More Races

There are penalties for non-compliance, of course. Calculating mean and median pay and then classifying it as required is no easy task. Some comfort can be taken by the requirement that the data need only encompass a single pay period from the last calendar quarter of the year. But there are already tech companies offering software solutions, and some employers are going to need these products to get through this exercise.

So where do staffing firms come into play? Like any California employer, if you have at least one California employee and over 100 total employees, you must file an Employer Report. But there is another report that your clients may have to file. It's called a "Labor Contractor Employee Report," and staffing firms are their "labor contractors."

If your staffing client uses over 100 “labor contractor employees” (anywhere), and has at least one labor contractor employee in California (or working remotely and reporting to California), the client’s report must include the same information for its California temps. Further, the law requires you to provide your California temp worker data to the client for its report. This means providing the client with your compensation and demographic data on the applicable assigned personnel. In other words, if your margins were not visible to the client in the past, they soon will be.

The deadline for doing this is May 10, 2023.  In 2024, the deadline will be January 1. If you want the gory details, the California Civil Rights Department has them here: PDR FAQs – 2022 Reporting Year | CRD (ca.gov)

If you employ internal workers and/or staff temps in California, now is the time to investigate your potential obligations under SB 1162.

Bill Josey, wjosey@staffinglaw.com