Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.
On February 1, 2021, the California Department of Fair Employment and Housing (DFEH) posted a User Guide, Excel template, and .CSV example to facilitate the submission of the newly required pay data report (Pay Data Report) by March 31, 2021 and annually thereafter. The DFEH also added and updated answers to frequently asked questions (FAQs) multiple times in January and February. All this indicates that the DFEH is on track to collect Pay Data Reports by the deadline and clarifies related requirements and procedures.
The User Guide contains an overview of the content of the Pay Data Report and the Portal that will be used to upload those Reports, as well as detailed instructions for creating and certifying a Pay Data Report. The appendices to the User Guide, the Excel template, and .CSV example provide instructions and examples for completing the Pay Data Report in various formats. The new FAQs provide helpful guidance that clarifies whether employers must comply and how they may do so.1 These are all essential resources for employers preparing to submit a Pay Data Report by the fast-approaching deadline.
Additional and Updated FAQs
The recently released FAQs address issues related to employees teleworking from California, the appropriate measure for pay, calculation of hours worked for exempt and non-exempt employees, the significance of the “Snapshot Period,” professional employer organizations (PEOs), and mergers, acquisitions and spinoffs.
These FAQs address the reality of teleworking in 2020 and how it may impact whether an employer is required to submit the Pay Data Report. Previously, the DFEH explained that employees working in California and employees assigned to California establishments must be included in Pay Data Reports. They make clear that employees assigned to a non-California establishment but teleworking from California during the Snapshot Period must be included in Pay Data Reports as well. This may expand the establishments included and may impact whether an employer must submit a Pay Data Report at all.
Regarding wages, the DFEH previously announced that “W-2 Box 5 – Medicare wages and tips” must be included in the Pay Data Report. This is an important distinction from the prior EEO-1 Component 2 (now suspended) which required W-2 Box 1 wages. The DFEH has now clarified that W-2 Box 1 wages should be used if any employee has wages not reported in Box 5 with clarifying remarks in the associated field. As an example, this may be necessary for an H-2A visa holder.
Although PEOs may prepare and file Pay Data Reports on behalf of employers, it is ultimately the employer’s responsibility to ensure compliance with the law and an official of the employer must still certify the accuracy of the Report. PEOs are not able to submit a Pay Data Report that covers multiple employers (that is, covering the PEO itself and client companies, or multiple client companies).
For mergers, acquisitions, and spinoffs that occurred during the reporting year, employers can decide how to report pay and hours-worked data as long as the approach is consistent and noted in the remarks field. For example, if pay is reported for a post-acquisition period, hours worked should also be reported for that period.
Key Takeaways for Preparing Pay Data Reports
The User Guide begins by identifying the employers that are required to submit the Pay Data Report as “private employers with 100 or more U.S. employees (and at least one employee in California).” Although the DFEH addressed this requirement in November 2020, it continues to reiterate its importance, likely in light of the ambiguity in SB 973 (the law mandating compensation data collection) and Government Code section 12999, which vaguely refer to “a private employer that has 100 or more employees” and “businesses with 100 or more employees.” The DFEH is emphasizing that an employer is required to submit the Pay Data Report if it has just one California employee during the Snapshot Period it selects.2
For those employers accustomed to completing the EEO-1 Report, the User Guide includes similarities between the EEO-1 Report and the Pay Data Report. The similarities include the establishments identified by the employer and categorization of job, race, and ethnicity. The User Guide even refers employers to the EEO-1 Instruction Booklet for related guidance. The Equal Employment Opportunity Commission has not yet opened its EEO-1 portal or published instructions for this year’s collection.
Key Differences from Federal Requirements
Although the DFEH has adopted the federal approach to the EEO-1 Reports in general, there are some notable differences.
The Pay Data Report requires non-binary employees to be reported in the same manner as male and female employees. In other words, non-binary employees are reported within the Pay Data Report using specific codes. For example, code “D10” is used to report “Non-Hispanic/Non-Latino – Non-Binary – White” employees. The EEO-1 Report historically has not included a code for non-binary employees (although in its most recent collection, it noted that employers could identify non-binary employees by way of the comment field).
The Pay Data Report will not include consolidated data. Rather, each establishment is reported separately within a single Pay Data Report per employer. The EEO-1 Report consists of separate establishment reports.
The wages used to assign pay bands for the Pay Data Report are from W-2 Box 5 when available instead of Box 1 wages, as noted above.
Completing the Pay Data Report
The User Guide includes detailed instructions for completing the Pay Data Report. To complete the Report, employers will need to assign codes to employees based on job, race/ethnicity/gender, and pay band. The DFEH has adopted the categories used in EEO-1 Component 1 and Component 2 for job, race/ethnicity, and pay band, but not gender. For the Pay Data Report, number of employees and hours will be reported for each job code, race/ethnicity/gender code, and pay band combination per establishment. For example, total employees and hours will be reported for “executive senior level officials and managers” (categorized in job code 1) that are “Hispanic/Latino – Male” (categorized in race/ethnicity/gender code A10) and earn $208,000 and over (categorized in pay band 12).3
In addition to the explanations in the User Guide, the Excel template includes instructions for and examples of employer information (Section I), establishment information (Section I.A), and employee detail (Section I.B) for single- and multi-establishment employers. Although not included in Sections I.A or I.B, Section I requires the employer to submit information that is not California specific—the total U.S. employees and total U.S. establishments. Section I also requires the employer to indicate whether it is “owned or affiliated with another company, or there is a centralized, integrated or similar ownership, control, management or compensation (such as the same management personnel or central control of personnel policies, stock plans and/or labor relations) between the group.”4
Instead of completing the Excel template, employers can prepare a .CSV file consistent with the example the DFEH has made available or enter data in the online fillable form.
Pay Data Reporting Portal
Although the Pay Data Reporting Portal is not yet accessible, it is expected to be available by February 16, 2021. The User Guide includes a general description and images of each page in the Portal. Through the Portal, employers will submit their Pay Data Reports either by uploading an Excel or .CSV or by using the Portal’s fillable form. Each employer may only certify a single report. This means employers must submit data for all applicable establishments and employees in a single report.
It remains unclear whether the DFEH will seek to enforce the Pay Data Reporting requirement. It is, however, empowered to seek an order for compliance and recover costs against employers that do not file the report by March 31. Employers of more than 100 U.S. employees with any employees assigned to California establishments or working in California, even if they teleworked from California, should consult with counsel to ensure compliance with the Pay Data Reporting requirements.
1 See Jim Paretti, Denise M. Visconti, Allan King, David Goldstein, and Chris Gokturk, California Provides Additional Guidance on Employee Pay Data Reporting, Littler ASAP (Nov. 25, 2020), for an analysis of earlier-released FAQs.
2 A California employee is any employee working within California or assigned to a California establishment.
3 The pay bands are established by the U.S. Bureau of Labor Statistics (BLS) in the Occupational Employment Statistics survey.
4 This question tracks the guidance for determining whether an employer employs more than 100 employees as part of a single enterprise.