California Requires Employers of 100+ Employees to Submit Pay Data Annually to Department of Fair Employment and Housing
Beginning on March 31, 2021, private California employers who have 100 or more employees must annually report detailed pay data, categorized by gender, race, and ethnicity, to the California Department of Fair Employment and Housing (DFEH). This reporting date coincides with the next reporting date for the EEO-1 report which employers of this size are already required to file with the Equal Employment Opportunity Commission (EEOC). The California law is modeled after the EEO-1 Component 2 reporting requirement for which the EEOC collected data for 2017 and 2018, which the EEOC then announced it would not collect for future years.
What Must Be Reported?
1. A “snapshot” during a single pay period of the employer’s choice between October 1 and December 31 of the prior year quantifying all employees in the following job categories by race, ethnicity, and sex:
a. Executive or senior level officials and managers.
b. First or mid-level officials and managers.
e. Sales workers.
f. Administrative support workers.
i. Laborers and helpers.
j. Service workers.
These are the same categories used in the federal EEO-1 form.
2. The number of employees by race, ethnicity, and sex, whose earnings fall within each of the pay bands used by the U.S. Bureau of Labor Statistics in its Occupational Employment Statistics Survey. Employers are to use earnings derived from the total W-2 earnings for each employee in the “snapshot” for the entire Reporting Year, even if the employee did not work the full calendar year.
3. The total number of hours worked by each employee in the “snapshot” in each pay band during the Reporting Year.
4. The employer’s North American Industry Classification System (NAICA) code.
If an employer has more than one “establishment” — defined as an “economic unit producing goods and services” — it must submit a report for each establishment and a consolidated report that includes all employees.
An employer may, but is not required to, explain its wage practices, including those based on a seniority or merit system, systems that measure earnings by quality or quantity, and other bonafide job-related factors other than sex, race, and ethnicity such as education, training, and experience.
How Will the Report be Submitted?
The required data must be submitted in a format that allows the DFEH to “search and sort the information using readily available software.” The DFEH is expected to provide further details regarding the report submission process.
An employer may also comply with the law by submitting an EEO-1 Report “containing the same or substantially similar pay data” — a term that is not yet defined.
How Will the Law be Enforced?
The DFEH may seek an Order requiring an employer to comply with all requirements of the new law and may recover the costs associated with seeking compliance.
Who Will Have Access to the Data?
Under the new law, the DFEH must make the reports available to the CA Division of Labor Standards and Enforcement (DLSE) upon request and must maintain the reports for at least ten (10) years. DFEH and DLSE officers or employees may not publicize any individually identifiable information obtained from the report prior to the institution of certain investigation or enforcement proceedings.
How Will the Data Be Used?
Importantly, the new law provides the DFEH with the power to receive, investigate, conciliate, mediate, and prosecute complaints alleging unlawful practices in violation of the Equal Pay Act. The DFEH, in coordination with the DLSE, must adopt procedures for the enforcement of the equal pay provisions of California law.
Employers should begin compiling the data they will use to complete the new report. Employers should consider partnering with counsel to identify and correct any potential disparities in pay. By involving counsel in a confidential audit for the purpose of obtaining legal advice, the attorney-client privilege would likely protect any conclusions drawn from the audit, as well as the strategy for addressing any concerns, although the data itself likely would not be protected from disclosure under the attorney-client privilege.
Please do not hesitate to contact any of our attorneys if you have any questions or would like additional information.