California Enacts Pay Data Reporting Law

In a continued effort to reduce gender and racial pay gaps, on Sept. 30, California Gov. Gavin Newsom signed into law SB 973, which creates massive pay reporting requirements for employers. 

In 2021, certain California employers will be required to submit annual information on their employees' pay data by gender, race and ethnicity to the state's Department of Fair Employment and Housing (DFEH).  A similar bill was introduced last year (following the EEOC's court battle), but it failed to clear the necessary hurdles before the end of the legislative session. This year, however, it crossed the finish line.

Specifically, the new law requires employers, (a) with 100 or more employees; and (b) that must file an annual Employer Information Report (EEO-1) under federal law, to submit an annual report to the DFEH that includes the number of employees (and the hours they worked):

• By race, ethnicity, and sex.
• In each of the job categories in the federal EEO-1 report.
• Whose annual earnings fall within each of the pay bands used by the U.S. Bureau of Labor Statistics in the Occupational Employment Statistics Survey.

Employers with multiple establishments must submit a report for each establishment and a consolidated report that includes all employees. The first report is due to March 31, 2021.

Background

The journey to this new California requirement began in January 2016, when the EEOC announced a revision to the EEO-1 Report to include disclosure of aggregate employee pay data by gender, race and ethnicity. The EEOC required employers to begin using the new EEO-1 Report (including pay data) in 2018. But in 2017, the Trump Administration postponed this pay data collection indefinitely. Pay equity advocates challenged this decision, and the court ordered EEOC to reinstate the collection for the 2017 and 2018 filing years (filed jointly in 2019). 

EEOC is currently studying the quality and utility of the pay data it collected. In the meantime, the EEOC concluded that the burden on employers "far outweigh[s]" the pay data's "unproven utility" and discontinued all pay data collection efforts.

With this new law, it appears the Golden State balances these interests differently. According to the state legislature, California believes continued data collection will permit the state to "more efficiently identify wage patterns and allow for targeted enforcement of equal pay or discrimination laws." Time will tell.

But until then, California employers have a new annual reporting obligation that mirrors the former EEO‑1 pay data report. Just about everything else, however, is less clear: What will the form look like? How many employees must an employer have in California to be covered? And if an employer is covered, must it report on workforces outside of California as well? 

While there are some uncertainties, there is hope that the state will release additional guidance to assist employers with compliance.

Christopher T. Patrick is an attorney with Jackson Lewis in Denver. Susan E. Groff is an attorney with Jackson Lewis in Los Angeles. © 2020 Jackson Lewis. All rights reserved. Reposted with permission.