California to Require Employers to Annually Submit Pay Data to DFEH

Written by Jeremy Mittman and Thea Rogers

California Governor Gavin Newsom recently signed into law Senate Bill (SB) 973, a requirement that private employers of 100 or more employees report to the Department of Fair Employment and Housing (DFEH) pay and hours-worked data by job category, sex, race and ethnicity by March 31, 2021.  Subsequent pay data reports must be filed annually. SB 973 is similar to the Employer Information Report (EEO-1) “Component 2” pay data requirement that was enacted during the Obama Administration, but was suspended by the Trump Administration.

Employers’ pay data report must include the following: (1) the number of employees by race, ethnicity, and sex in each of ten job categories (the same job categories used in the EEO-1); (2) the number of employees by race, ethnicity, and sex whose annual earnings fall within each of the pay bands used by the United States Bureau of Labor Statistics; and (3) the total number of hours worked by each employee counted in each pay band. Employers with multiple establishments in California are required to submit a report for each establishment, as well as a consolidated report that includes all employees.

For purposes of the 100 employee count, ‘employees’ include all individuals on payroll, whether full- or part-time, for whom the employer must withhold federal social security taxes and include in an EEO-1 Report.  SB 973 does not make clear, however, whether the law applies to employers with more than 100 employees in the United States, or only to employers with more than 100 employees in California specifically.  Additionally, it is unclear whether only California employees must be included in the pay data report employers provide to the DFEH.  The DFEH is likely to provide guidance and clarification on this in the coming weeks.

Finally, SB 973 permits the DFEH to receive, investigate and prosecute complaints alleging discriminatory wage practices under California’s Equal Pay Act (Labor Code 1197.5). The DFEH is authorized to share the reports with the California Division of Labor Standards Enforcement (DLSE) for the agencies to identify wage patterns and engage in “targeted enforcement” of California’s equal pay and anti-discrimination laws. If an employer simply does not submit a required pay data report, the new law also permits the DFEH to seek an order requiring the employer to do so.

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