California Offers Limited Guidance on New Pay Data Reporting Requirements; Further Guidance Expected

On November 2, 2020, the California Department of Fair Employment and Housing (DFEH) released Frequently Asked Questions providing limited guidance to employers as to how to comply with their obligations for filing employee compensation data with the state under the recently enacted SB 973. Under SB 973, California employers with 100 or more employees will be required to submit to DFEH a “pay data report” by no later than March 31, 2021, and annually thereafter, providing detailed information as to employee compensation.1

The FAQs provide scant guidance to employers regarding their obligations under the new law, although the FAQs indicate both that additional FAQs will be forthcoming, and that DFEH intends to issue regulations implementing the statute going forward.

The FAQs explain how pay data will be kept confidential, although DFEH may publish aggregate reports of the data that do not identify any particular employer.  Moreover, in the absence of clear guidance from the state, the FAQs do note that DFEH “is endeavoring to create a system that closely resembles the EEOC’s system” for reporting workforce demographics, which may shed light on future questions.  DFEH also indicated that it will issue a standard form for employers to report their compensation data.

Unfortunately, key questions are left unanswered in this first round of guidance.  For example, the FAQs do not clarify which employers will be required to file in California.  The statute requires only that “a private employer that has 100 or more employees and who is required to file an annual Employer Information Report (EEO-1) pursuant to federal law” will be required to file under the new law.  It is not clear, however, whether California will require employers to file information only with respect to California employees, or a broader segment of their workforce.  Nor is it clear what the obligations of employers that may be headquartered outside of the Golden State, but employ workers within, will be.  Finally, the FAQs offer no guidance as to what information need be reported in terms of job categories or specific pay bands, or how to calculate “hours worked” for employees.  The FAQs indicate that these specifics will be “coming soon,” as will guidance for multi-establishment employers and how to address acquisitions and mergers in the new reporting scheme.

California’s law is modeled on pay data reporting requirements adopted during the Obama administration, and later halted by the Trump administration.  A federal court ultimately ordered that the Trump EEOC collect two years’ worth of compensation data, which was completed in 2020.  EEOC chose not to share the compensation data it collected with state civil rights enforcement agencies—but in late October, the State of California, joined by Maryland and Minnesota, sued EEOC in federal court, claiming that EEOC’s failure to share its data violates federal law.  That suit is ongoing.

This issue continues to develop, and should be of keen interest to both employers in California, and those out-of-state employers that may have workers in the Golden State.  Littler’s WPI will continue to keep readers apprised of additional guidance as it becomes available.

See Footnotes

1 Under the bill, the pay data report must include a breakdown of employees by race, ethnicity, and sex in 10 broadly defined job categories. The report must further include a breakdown of employee compensation in one of 11 pay bands used by the U.S. Bureau of Labor Statistics in its Occupational Employee Survey, ranging from a low of “less than $19,239” to a high of “more than $208,000” again by race, ethnicity, and sex.  Employers will use W-2 income for this reporting.  Finally, employers must report total hours worked by each employee within a given pay band during the reporting year.

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.