In the midst of the COVID-19 pandemic in 2020, California passed a new law requiring private employers to submit data on the pay, hours worked, and demographics of their employees by March 31, 2021. A substantial number of employers are covered by this law, and the filing deadline for this data is quickly approaching. Here are the highlights:
Who must file?
Employers with 100 or more employees in the United States and any California employee must submit a pay data report.
For whom must an employer file?
Employers must include employees who either reside and work in California or reside outside of California but report to work in California.
What data is required?
In addition to information about the employer, required data includes job categories, pay bands, codes for ethnicity/race/sex groupings, total hours worked and total employees by group for each “establishment.”
What is the data used for?
According to the California Department of Fair Employment and Housing (DFEH), “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.” The public cannot directly access the data, although DFEH may aggregate the data for reporting. It remains an open question whether this data will be accessible to litigants or shared with other state or federal agencies.
What happens if an employer does not file?
Currently, DFEH is permitted to enforce the law and then recover the costs of any enforcement. DFEH has reported that it has funding available for enforcement. The statute does not currently include a private right of action. We believe that the State is taking a wait-and-see approach and may add additional enforcement mechanisms in the future.
When must an employer file?
No later than March 31, 2021 and every March 31 afterwards. The portal opens on February 16, 2021. DFEH will consider a request to delay enforcement due to the coronavirus pandemic, but this is not automatically granted and DFEH has not provided guidance on acceptable reasons for the request. There are significant strategic considerations in determining whether to make such a request that should be discussed with counsel.
Where must data be reported?
Data may be uploaded to the portal in a spreadsheet (excel or csv) or employers may complete online forms provided on the portal.
Why does California want this data?
The purpose of the law is twofold: (1) to encourage employers to self-assess pay disparities and make changes, and (2) to allow DFEH to identify wage patterns to enforce the Fair Pay Act. The same California Senator who authored the Fair Pay Act is the author of this pay data statute.
How does this compare to EEO-1 Reporting?
There are several similarities to the system used to collect EEO-1 data, and California has indicated that “to ease reporting by employers, DFEH is endeavoring to create a system that closely resembles the EEOC's system.” Therefore:
- Establishments are the same. In other words, an establishment that is already required to file EEO-1 data will also be required to file California pay data.
- Job categories are the same.
- Pay bands are the same.
Of course, EEOC is not currently collecting EEO-1 Component 2 data, so California's efforts to model its system after EEOC may be cold comfort for employers. In addition, there will still be some notable differences even if EEOC reinstitutes collection of Component 2 data:
- Race codes are different.
- There are three genders: male, female, and non-binary.
- Wages are determined by Box 5 on the W-2.
- “Hours worked” includes actual time worked plus any PTO, or a proxy formula for exempt employees if actual hours are not available.
- Employers must make a good faith attempt to calculate the average number of hours for exempt employees, instead of using a generic multiplier to calculate the total hours.
- A parent company and its subsidiaries may not be able to file together if they are not a single “enterprise.”
- New guidance from DFEH just a few weeks ago now makes clear that multi-establishment employers are not required to submit a consolidated report.
- A report for an establishment should be filed even if there is only one California employee assigned to it.
- More information is required about an employer, including whether the employer is a contractor or employer for the state of California; the total number of U.S. employees; the total number of U.S. establishments; and the employer's ownership, affiliation or enterprise.
- A Professional Employer Organization (PEO) or Human Resource Outsourcing Organization (HRO) may file on behalf of a company, but a company official must certify the accuracy of the reporting.
The state has published additional forms and guidance to help with the submission of data: https://www.dfeh.ca.gov/paydatareporting/.
Key Takeaways
Employers need to act now as the deadline for filing the new report is March 31, 2021. To meet this fast approaching deadline, Employers should work with counsel to:
- Identify and gather data needed to complete the report.
- Properly classify workers who are teleworking from California but are assigned to an establishment in another state or who are teleworking from other states but are assigned to a California establishment.
- Determine whether to report data only on California employees and establishments, or to report broader data, including establishments and employees outside of California.
- Consider the potential impacts of reporting as a single enterprise on corporate separateness arguments and potential consequences.
- Review compliance with the California Labor Code generally, including compliance with rules regarding payroll statements, classification of employees, and updating forms, policies, and procedures.
- Review and analyze the data to determine whether disparities exists and consider steps to minimize future risk.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
