California requires large employers (100 or more employees ) to report pay data starting in 2021. On September 30, 2019, Senate Bill 873 was signed requiring large employers in California to submit a report on pay and hours worked to the DFEH by March 31, 2021 and annually thereafter. The initial announcement did not provide employers with very much information regarding the content, format, or guidelines on counting employees. One of the more glaring questions was how to count employees when an employer has locations in California and other states. On November 23, 2020, DFEH issued several FAQs covering the new submission. We are providing a few of the key questions and responses. The complete set of FAQs can be found on the Pay Data Report page provided by DFEH, https://www.dfeh.ca.gov/paydatareporting/.
Why does California require large employers to report pay data to DFEH?
(11/02/2020) In SB 973, the California Legislature required employers of 100 or more employees to report to DFEH pay and hours-worked data by job category and by sex, race, and ethnicity (hereinafter “pay data”). In enacting this legislation, the Legislature found that “[d]espite significant progress made in California in recent years to strengthen California’s equal pay laws, the gender pay gap persists, resulting in billions of dollars in lost wages for women each year in California. Pay discrimination is not just a women’s issue, but also harms families and the state’s economy. In California, in 2016, women working full time, year round made a median 88 cents to every dollar earned by men, and for women of color, that gap is far worse. Although there are legitimate and lawful reasons for paying some employees more than others, pay discrimination continues to exist, is often ‘hidden from sight,’ and can be the result of unconscious biases or historic inequities.”
By creating a system by which large employers report pay data annually to DFEH, the Legislature sought to encourage these employers to assess themselves pay disparities along gendered, racial, and ethnic lines in their workforce and promote voluntary compliance with equal pay and anti-discrimination laws. In addition, SB 973 authorized DFEH to enforce the Equal Pay Act (Labor Code section 1197.5), which prohibits unjustified pay disparities. The Fair Employment and Housing Act (Gov. Code § 12940 et seq.), already enforced by DFEH, prohibits pay discrimination. Employers’ pay data reports will allow DFEH to more efficiently identify wage patterns and allow for effective enforcement of equal pay or anti-discrimination laws, when appropriate. DFEH’s strategic vision is a California free of discrimination.
Will DFEH’s pay data reporting system be similar to the one used by the EEOC to collect EEO-1 Component 2 data?
(11/02/2020) To ease reporting by employers, DFEH is endeavoring to create a system that closely resembles the EEOC’s system to the extent permitted by state statute.
What is the deadline for employers to submit their pay data report(s) to DFEH?
(11/02/2020) Under Government Code section 12999(a), employers must submit their pay data reports to DFEH on or before March 31, 2021, and then on or before March 31 each year thereafter.
How do employers submit their pay data reports to DFEH?
(11/02/2020) SB 973 was enacted on September 30, 2020. DFEH is in the process of securing an independent contractor to provide the necessary IT infrastructure, including an employer submission portal on DFEH’s website. DFEH has notified several potential vendors with valid Information Technology Master Service Agreements with the State of California via a Request for Offer on October 27, 2020. Offers are due to DFEH by November 10, 2020 by 5:00 p.m. PT. DFEH anticipates that this portal will be available in advance of the March 31, 2021 filing deadline.
Which employers are required to submit pay data reports to DFEH?
(11/23/2020) Under Government Code section 12999(a), “a private employer that has 100 or more employees and who is required to file an annual Employer Information Report (EEO-1) pursuant to federal law shall submit a pay data report to” DFEH. An employee is “an individual on an employer’s payroll, including a part-time individual, whom the employer is required to include in an EEO-1 Report and for whom the employer is required to withhold federal social security taxes from that individual’s wages.” Gov. Code § 12999(m)(1).
An employer has the requisite number of employees if the employer either employed 100 or more employees in the Snapshot Period chosen by the employer or regularly employed 100 or more employees during the Reporting Year. “Regularly employed 100 or more employees during the Reporting Year” means employed 100 or more individuals on a regular basis during the Reporting Year. “Regular basis” refers to the nature of a business that is recurring, rather than constant. See Cal. Code Regs., tit. 2, §§ 11008(d)(1) & 11008(d)(1)(A). For example, in an industry that typically has a three-month season during a calendar year, an employer that employed 100 or more employees during that season regularly employed the requisite number of employees and would be required to file a pay data report to DFEH, if the employer is also required to file an EEO-1 Report.
Employees located inside and outside of California are counted when determining whether an employer has 100 or more employees. See Cal. Code Regs., tit. 2, § 11008(d)(1)(C). For example, an employer that had 50 employees inside California and 50 employees outside of California during the Reporting Year would be required to submit a pay data report to DFEH. An employer with no employees in California during the Reporting Year would not be required to file a pay data report with DFEH.
Part-time employees, including those who work partial days and fewer than each day of the work week, are counted the same as full-time employees. For example, for counting purposes, an employer has 100 employees when 60 individuals work every day and 40 individuals work alternate days to fill 20 positions, and there are no more than 80 individuals working on any working day. Employees on paid or unpaid leave, including California Family Rights Act (CFRA) leave, pregnancy leave, disciplinary suspension, or any other employer-approved leave of absence, are counted. See Cal. Code Regs., tit. 2, § 11008(d)(1)(B).
Consistent with federal EEO-1 filing requirements, an employer with fewer than 100 employees is required to file with DFEH “if the company is owned or affiliated with another company, or there is centralized ownership, control or management (such as central control of personnel policies and labor relations) so that the group legally constitutes a single enterprise, and the entire enterprise employs a total of 100 or more employees.” View EE0-1 Instruction Booklet.