Pursuant to a new law effective January 1, 2021, California employers must submit pay data reports to the California Department of Fair Employment and Housing (DFEH) by March 31, 2021.  In February, the DFEH issued guidance regarding the new requirement, including a Pay Data Reporting User Guide, report templates, and FAQs, all of which are available at https://www.dfeh.ca.gov/paydatareporting/.

Why Collect Pay Data?

For decades, employers with 100 or more employees have filed “EEO-1” reports with the federal government’s Equal Employment Opportunity Commission (EEOC).  Initially, the EEO-1 report only required the reporting of workforce sex/gender, race, ethnicity, and job composition data (“Component 1” data).  Then, in 2016, the EEOC added compensation and hours worked data to the reporting requirement (“Component 2” data).  After much debate and controversy, the EEOC stopped requiring Component 2 data in late 2019.

Last fall, the California Legislature enacted Senate Bill 973, which Governor Gavin Newsom signed into law.  The law requires employers with at least 100 employees and a presence in California to report Component 1 and Component 2 data to the DFEH.  The stated intent of the law is to encourage employer self-assessment by identifying pay disparities along gender, racial, and ethnic lines.

Which Employers Must Report?

Private employers (i) with 100 or more employees, at least one of whom works in California, and (ii) that are required to file EEO-1 reports with the EEOC, must comply with the new DFEH reporting requirement.  In determining whether an employer meets the 100-employee threshold, part-time employees and employees on leave are counted, but not staffing agency employees or independent contractors.

Which Employees and What Data?

Employers need only report data for employees working in or assigned to California “establishments.”  An “establishment” is defined by the new law as “an economic unit producing goods or services.”  Piggybacking on the EEO-1 requirements, the DFEH has directed covered employers to use the same “establishments” they used in EEO-1 reports.

Employers must report data for teleworkers assigned to California establishments, even if they reside outside California.  Similarly, if an employee is teleworking from California but assigned to an establishment outside California, the employer must report their data.  Employers may report data for other establishments and employees, but they are not required to do so.

Because employees come and go throughout the year, employers must use a “Snapshot Period” to identify which employees to include in their reports.  This period is a “snapshot” of a single pay period between October 1 and December 31 of the reporting year. Employers may choose the applicable pay period.

In general, for each establishment, employers must report by race, ethnicity, and sex/gender the number of (i) employees falling in specific job categories during the “Snapshot Period” (e.g., professionals, technicians, and laborers); and (ii) employees whose annual earnings fall within certain pay bands (established by the U.S. Bureau of Labor Statistics in the Occupational Employment Statistics survey).  The DFEH uses the terms sex and gender interchangeably, to include reporting an employee’s sex/gender as male, female or non-binary.  The report also must include the annual total of hours employees worked and/or were on leave paid by the employer (such as vacation time, sick time, or holiday time).  For exempt employees, employers should either use timesheets or other records to determine the applicable hours, or calculate the hours by multiplying the number of days an employee worked (including days on paid leave) by the employee’s daily average of hours worked.

Filing the Report

Employers must submit the required reports through the DFEH’s online Pay Reporting Portal, which went live earlier this month. Employers may upload an Excel or .csv file, or manually enter information using the DFEH’s online fillable form. The DFEH’s User Guide and downloadable report templates explain the steps necessary to report and certify data.

The deadline to file is March 31, 2021, and then every March 31 thereafter.  Employers that fail to submit the report on time may be subject to a court order compelling compliance.  The DFEH may recover its costs in seeking such an order.  Although the DFEH has not announced a process to request an “extension” of the March 31 deadline, it will consider an employer’s request for an “enforcement deferral.”  In practical terms, securing an enforcement deferral would amount to a one-month extension (i.e., through April 30, 2021).  Employers must submit deferral requests no later than March 30, 2021, and may do so by submitting a form available on the DFEH’s website.

Complying with new DFEH reporting process will take time.  Employers that have not starting gathering the required data already need to do immediately.

In addition, although employers may not have time to undertake a privileged pay equity audit before the March 31, 2021, reporting deadline, it is not too early to plan for next year.  Pay equity audits conducted through legal counsel may help with identifying potentially problematic pay disparities on a proactive basis.

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