California’s New Pay Transparency Law
California has just passed a pay transparency law requiring both public and private companies with 15 or more employees to include pay ranges in job postings, whether the advertisement is posted by the company or by a third party. The rule goes into effect January 1, 2023 and includes new requirements for companies to maintain comprehensive annual pay data reports for each employee both during and post-employment.
Signed into law by Governor Gavin Newsom on September 27, California Senate Bill 1162 includes a number of amended rules for companies with 100-plus employees, including one rule requiring companies who hire through labor contractors to submit separate pay data reports on those contracted workers.
Under the new law, the pay data report would require companies to submit information on “median and mean hourly rate for each combination of race, ethnicity and sex within each job category.” Job categories range from “Executive or senior level officials and managers” to “Laborers and helpers.” Both full and part time workers are included.
In addition, companies with multiple establishments will be required to submit that pay data for each establishment, instead of in a consolidated report, as had been previously required.
Regardless of company size, the new law specifies for civil penalties if employers don’t comply, allowing a person aggrieved by a violation of the provisions to bring a civil action for “injunctive and any other appropriate relief.” It also creates a rebuttable presumption in favor of an employee’s claim if an employer fails to keep records in violation of these provisions.
When the law becomes effective in January, California will have joined New York and Colorado in establishing pay transparency laws. New York’s law goes into effect on November 1, while Colorado’s law is already in effect. There is reason to suggest that since the economies of both California and New York combined make up a large portion of the nation’s economy, these two states are setting a trend for adoption of similar legislation nationwide.
Digital Assets to be Measured at Fair Value
The Financial Accounting Standards Board (FASB) has voted to require entities which hold crypto assets to measure those assets at fair value. This is a departure from the cost minus impairment method that entities currently are using to measure digital assets, including cryptocurrency.
Cryptocurrency has been in the crosshairs at both the SEC and at FASB. Last May FASB moved cryptocurrency to its prioritized topics list for standards-setting.
At its October 12 meeting FASB decided to require digital asset-holding entities to:
- Measure crypto assets at fair value using the guidance in Topic 820, Fair Value Measurement.
- Recognize increases and decreases in fair value in comprehensive income each reporting period.
- Recognize certain costs incurred to acquire crypto assets, such as commissions, as an expense (unless the entity follows specialized industry measurement guidance that requires otherwise).
FASB also decided that the fair value measurement and recognition requirements should be the same for both public and private entities.
FASB Seeks More Reporting on Business Segments
A new FASB-proposed accounting rule would require publicly-traded companies with various business activities, or “segments” to provide more frequent and detailed financial information about each of their business units’ performance and expenses.
The proposal represents the “most significant change to segment reporting since 1997” according to FASB, which is currently seeking stakeholder feedback on the proposed reporting standards.
Some of the key changes would require a public entity to:
- Disclose, on an annual and quarterly basis, significant segment expenses that are regularly provided to the chief operating decision maker (CODM) and included within each reported measure of segment profit or loss.
- Disclose, on an annual and quarterly basis, an amount for other segment items by reportable segment and a description of its composition. The other segment items category is the difference between segment revenue less the significant expenses disclosed and each reported measure of segment profit or loss.
- Provide all annual disclosures about a reportable segment’s profit or loss and assets currently required by Topic 280, Segment Reporting, in interim periods.
FASB’s comment period is open until December 20, 2022.
Celebrity Influencer Settles with SEC
Social media influencer Kim Kardashian was charged and settled with the SEC for touting a crypto asset security that was offered and sold by EthereumMax without disclosing the payment she received for the promotion.
The SEC found that Kardashian failed to disclose that she was paid $250,000 to publish a post on her Instagram account about EMAX tokens, the crypto asset security being offered by EthereumMax. Her post included a link to the EthereumMax website, which gave instructions for potential investors to buy EMAX tokens.
Without admitting or denying the SEC’s findings, Kardashian agreed to pay $1.26 million which included approximately $260,000 in disgorgement, which represented her promotional payment plus prejudgment interest, and a $1,000,000 penalty. She also agreed to not promote any crypto asset securities for three years.
The SEC has been warning celebrities touting crypto, an asset which the SEC views as securities, that they must make clear to investors that they are being paid for the endorsement.
“The federal securities laws are clear that any celebrity or other individual who promotes a crypto asset security must disclose the nature, source, and amount of compensation they received in exchange for the promotion,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement. “Investors are entitled to know whether the publicity of a security is unbiased, and Ms. Kardashian failed to disclose this information.”
