2023 Contractor Pay Reporting on Deck for California Employers
Workspan Daily
February 03, 2023
Key Takeaways
  • Going beyond salary ranges on job postings. California’s new pay transparency law requires employers to also provide their median and mean pay gaps as well as a contractor pay report.  
  • The specifics. The contractor pay report is required for employers that use 100 or more contractors. This will be an arduous task, as many employers do not have demographic and pay data on their labor contractors. 
  • California could stand alone. Some legal analysts do not anticipate other states immediately following the same additional pay transparency requirements, as most seem content with the federal requirement to file the EEO-1 report, a mandatory annual data collection that requires all private sector employers with 100 or more employees to submit demographic workforce data, including data by race/ethnicity, sex and job categories.

Among the many headwinds Silicon Valley companies currently face this year are new regulations that are designed to increase pay transparency but could also cause compliance headaches.  

California recently became the seventh state to enact a pay transparency law, joining Washington, Nevada, Connecticut, Maryland, Rhode Island and Colorado. Maryland requires pay to be disclosed for job postings upon request, and Connecticut, Nevada and Rhode Island require disclosure during the hiring process. Although, Connecticut recently proposed legislation that will require employers to provide pay ranges on all job postings.   

California’s law follows Colorado, which went into effect in January 2021, and New York City in that it specifies that employers must provide salary information on the job postings.  

California’s new legislation SB-1162, which took effect Jan. 1, also requires employers in the state to provide their median and mean pay gaps as well as a contractor pay report. 

Employers in California that have more than 100 contractors will have to file pay reports for those workers. This means organizations for the first time will be required to gather pay and demographic information from staffing companies.   

The new regulations will  affect Silicon Valley titans like Apple, Google and Meta, which have sizable gig workforces but it’s unclear how the law will apply to companies like Uber and Lyft that have a majority of workers classified as independent contractors.   

“California is either first or they’re playing catchup and adding on these additional things,” said Christine Hendrickson, vice president of strategic initiatives at Syndio. “Two to four years from now, the discussion is really going to be around those two things — how we pay contractors and how that aligns to paying employees in an organization and then this focus on equal access to opportunities.”    

Complying with the California Pay Reporting Requirement  

The real employer burden of the new California law is twofold, said Joy Rosenquist, special counsel in Littler Mendelson P.C.’s Sacramento, California office.    

While it is the new requirement that employers report data on their labor contractors in addition to their employees, many employers do not have demographic and pay data on their labor contractors.  

“Keep in mind,”  Rosenquist added, “there is a special definition of a labor contractor under this law — it does not mean any contractor.” 

Second, employers now have to collect and report median and mean pay for their employees and break it down according to race, gender and ethnicity in a way the California Civil Rights Department (CRD) requires.   

“Depending on the size of the employer, this could be a monumental effort and requires a lot of administrative staff time,” Rosenquist said. 

By dedicating resources to this project, she  said, it could help determine where your data is, ensure its accuracy and start a process for organizing it according to the specified categories and pay bands required under the language of the statute.          

So what’s the best way to meet this compliance challenge? Rosenquist recommended the following: 

  • Put a team together. This is a joint effort with your legal, human resources and technology teams. Designate one person to act as liaison with the CRD on technical questions or inquiries. 
  • Start now. Although the filing is not required until May 10, 2023, it will take larger companies several months to collect and organize this data. Three months comes and goes pretty quickly. If you have not started, now is the time to put together your team.  
  • Begin outreach. Send labor contractors a letter letting them know you have designated them as an individual or firm that you must report on to the CRD.  Let them know you need their pay data required under Government Code 12999 within the next 45-60 days. This allows them time to compile their data and still gives you a month to review and submit your report.  

While California may be a trendsetter for labor and employment laws that other states tend to look to when enacting new reforms, it’s also a unique state governmental system and Rosenquist doesn’t foresee other states enacting similar laws as burdensome as SB-1162.  

Thus far most states seem content with the federal requirement to file the EEO-1 report, a mandatory annual data collection that requires all private sector employers with 100 or more employees to submit demographic workforce data, including data by race/ethnicity, sex and job categories.   

“California requires the same but has expanded on the depth and categories of information employers must provide,” Rosenquist said. “For now, I suspect most states will simply defer to the EEO-1 instead of generating their own state specific requirements.” 

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