Gov. Newsom signs California’s newest and broadest pay transparency law, SB 1162, requiring California companies to disclose pay data starting next year.
Read more: Big Brother Just Got Bigger: Expanded Pay Data Reporting Expected to Hit the Golden State
As always, Blank Rome’s employment team stands by ready to assist.
As our team has previously reported, California currently requires private employers with 100 or more employees, and who are required to file an annual EEO-1 report, to submit certain employee pay data to the state’s Civil Rights Department, formerly known as the Department of Fair Employment and Housing (“DFEH”), including pay data on the number of employees by race, ethnicity, and sex, in each of the 10 EEO-1 specified job categories.
As pay transparency rules continue to sweep the nation, the California legislature—never to be outdone—has passed its own amendments which will significantly expand employers’ current pay data reporting requirements and wage range disclosure obligations. The newly passed bill, “SB 1162,” is currently sitting on Governor Newsom’s desk for signature (or veto). With a potential compliance date of May 10, 2023 (and reporting due each year thereafter on or before the “second Wednesday of May”), Golden State employers are advised to take inventory now of additional steps they need to take in order to adequately prepare for and timely comply with SB 1162, including:
If enacted, SB 1162 also allows courts to impose civil penalties “not to exceed one hundred dollars ($100) per employee upon any employer who fails to file the required report and not to exceed two hundred dollars ($200) per employee upon any employer for a subsequent failure to file the required report.”
Governor Newsom has until September 30, 2022, to sign the bill, which would trigger a January 1, 2023, effective date and have massive impacts across the state. As we learned earlier this year, an ounce of prevention is worth a pound of cure. Blank Rome’s employment team stands by ready to assist.
Caroline Powell Donelan and Howard M. Knee
As a reminder, California’s new pay data reporting for employers with 100 or more employees (and at least one employee in California) is due on or by March 31, 2021. You can read more about these new requirements here. California’s Department of Fair Employment and Housing (“DFEH”) has released helpful FAQs to walk employers through the filing requirements and required content. On February 1, 2021, the DFEH also published a 67-page California Pay Data Reporting Portal User Guide. While the portal itself will not be available until February 16, 2021, the user guide contains helpful information on pay data report content, differences and similarities between the California report and the EEO-1 report, and navigating the Pay Data Reporting Portal (once available), as well as sample reports. Please contact us with any questions.
Caroline Powell Donelan and Howard M. Knee
On or by March 31, 2021, (and each March 31 thereafter), private employers in California with more than 100 full-time and part-time employees that are required to file employer information reports with the federal government (“EEO-1” reports) will be required to submit detailed data to California’s Department of Fair Employment and Housing (“DFEH”) regarding the race, ethnicity, and gender of employees in the 10 job categories used in the federal EEO-1 form. Specifically, SB 973 requires employers to report: (1) the number of employees by race, ethnicity, and gender in each of these job categories (looking at any single pay period between October 1 and December 31 of the preceding year); (2) the number of employees by race, ethnicity, and gender whose annual earnings fall within each of the pay bands used by the Bureau of Labor Statistics; (3) the total number of hours worked by each employee counted in each pay band (despite the fact that this information is not commonly kept for exempt workers); and (4) the employer’s North American Industry Classification System (“NAICS”) code. If an employer has more than one establishment in California, it is required to submit a report for each establishment, as well as a consolidated report that includes all employees.
And, what will the government do with this data? The stated intent of the law is to identify and remedy pay inequities and strengthen current equal pay laws. The new legislation permits the DFEH to use the data collected to prosecute complaints alleging discriminatory wage practices under the Equal Pay Act (California Labor Code § 1197.5). Moreover, the DFEH is authorized to share the reports with the Division of Labor Standards Enforcement (“DLSE”), so the DLSE can identify wage patterns and institute litigation to challenge suspected discriminatory practices. In other words, rather than the government responding to complaints from employees, or investigating targeted industries, it will now evaluate all data submitted by large employers and decide whether enforcement action is warranted.
The legislation provides that reported data will be kept confidential and not subject to disclosure under the Public Records Act. The DFEH, however, may compile, publish, and publicize aggregate reports based on the data it receives, so long as the aggregate reports are reasonably calculated to prevent the association of any data with any individual business or person. The data may be used for investigation and enforcement proceedings by the DFEH and the DLSE under the Fair Employment and Housing Act and Labor Code, respectively. Of course, parties to private litigation will likely seek discovery of reported data as well.
SB 973 essentially mirrors an Obama-era pay data collection rule issued by the Equal Employment Opportunity Commission, which was later stayed by the Trump administration. Of course, it remains to be seen whether our new administration will revive these collection efforts at the federal level, but for now, California remains willing to carry the torch.
If you have any questions about your pay practices or these new California reporting requirements under SB 973, please contact a member of our Labor & Employment team.
Mark Blondman and Emery Gullickson Richards
As we reported last month Judge Tanya Chutkan of the United States District Court for the District of Columbia ruled on March 4 that the Office of Management and Budget (“OMB”) was to reinstate the EEOC’s 2016 pay reporting Rule, the enforcement of which had been blocked by the Trump administration. Under that Rule, which was to have been effective with the filing of EEO-1 forms in March 2018, employers with more than 100 employees would be required to collect and report aggregated W-2 data and hours worked, based on gender, race, and ethnicity, in 10 job categories, across 12 pay ranges, for each of a company’s physical locations.
The one issue left unanswered by Judge Chutkan’s March 4 Order was when the Equal Employment Opportunity Commission (“EEOC”) was required to collect the employee pay data. This morning, Judge Chutkan, held that the Commission had to collect the data by September 30, 2019. The EEOC has indicated it will make the collection portal available by July 15 and provide information and training to employees prior to that date.
The clock is ticking and, absent a successful appeal of Judge Chutkan’s March 4 decision, employers should now be collecting the data required to be included in the EEO-1 form and be prepared to file those reports on or before September 30. Members of our Firm’s Labor & Employment Practice Group are available to assist in navigating the EEO-1 Form.
Last week, the Office of Management and Budget in the White House informed the EEOC that it was delaying implementation of a rule the EEOC finalized last year, which would require significant additional information be included in annual EEO-1 reports. The EEOC’s new rule required employers to provide information on W-2 wage data and hours worked for employees within 12 specified pay bands. The first EEO-1 reports with such data were set to be due March 31, 2018. Continue reading “All (Employers) Hail the OMB as It Stays Implementation of New EEO-1 Wage Reporting”
