On September 30, California’s Governor Newsom signed into law a requirement that California employers would report on pay and hours worked data. The new law requires covered employers to submit their first report, covering 2020 data, by March 31, 2021.  The reporting is similar to the EEO-1 component 2 reporting that was required of all EEO-1 filers and reported on for years 2017 and 2018 in March 2019. 

The California law requires California employers with 100 or more employees to, on or before March 31, 2021, and on or before March 31 each year thereafter, submit specific pay data to the DFEH covering the prior calendar, or “Reporting Year.” The report must include the following information:

• The number of employees by race, ethnicity, and sex for 10 job categories, similar to the regular EEO-1 categories. This is established by providing a “snapshot” that counts all employees in each job category by race, ethnicity, and sex, employed during a single pay period of the employer’s choice between October 1 and December 31 of the Reporting Year.

• The 10 job categories are as follows:

1. Executive or senior level officials and managers

2. First or mid-level officials and managers

3. Professionals

4. Technicians

5. Sales workers

6. Administrative support workers

7. Craft workers

8. Operatives

9. Laborers and helpers

10. Service workers

• The number of employees by race, ethnicity, and sex, whose earnings fall within each of the pay bands used by the U.S. Bureau of Labor Statistics in its Occupational Employment Statistics Survey. This is established by calculating the total earnings shown on the IRS Form W-2 for each employee in the “snapshot” for the entire Reporting Year, regardless of whether an employee worked the full calendar year.

• The pay reporting  is referring to the 10 pay bands the BLS calls “wage ranges.” They may look like the below as taken from a 2019 BLS wage survey report:
  
  

  Under $9.25	$9.25 to 11.74	$11.75 to 14.74	$14.75 to 18.74	$18.75 to 23.99	$24.00 to 30.24	$30.25 to 38.49	$62.00 to 78.74	$38.50 to 48.99	$49.00 to 61.99	$78.75 &Over

• The employee counted in each pay band during the Reporting Year.

• The employer’s North American Industry Classification System (NAICS) code.

• The Report may include a section for the employer to provide clarifying remarks; however, it is not required.

• Employers with more than one establishment must submit a report for each establishment and a consolidated report that includes all employees. “Establishment” is defined as “an economic unit producing goods or services.”

So, what happens with the data?  The law requires the DFEH to make the reports available to the Department of Labor Standards Enforcement (DLSE) upon request, to maintain the pay data reports for a minimum of 10 years, and authorizes the DFEH to seek an order requiring non-reporting employers to comply.

The pay law also prohibits any officer or employee of the DFEH or DLSE from making public any individually identifiable information obtained from the report prior to the institution of certain investigation or enforcement proceedings, and requires the Employment Development Department to provide the DFEH with the names and addresses of all businesses with 100 or more employees.

It may be assumed that this law only covers California employers with 100 or more employers, but California is known to expand their jurisdiction across borders.  If that happens, courts will have to step in to decide the reach of this law.

Moreover, the data reported is based on Box 1 of the W-2 filing of employees, which won’t accurately reflect salary info as it takes into account personal choices like healthcare, contributions to 401K and HSAs, and more.  Therefore, false assumptions of discriminations could be inferred leading employers to high costs of defending against potential liability.

Putting this data together will be highly burdensome for California employers, but burden is not a requirement of review for implementation of a law in California.

Further, it is unclear the privacy, confidentiality, and security of this data. The law requires the DFEH to make the data available to the Department of Labor Standards Enforcement (DLSE) upon request. Additionally, the DFEH must maintain the pay data for at least a period of 10 years.   Both the DFEH and DLSE are required to keep all individually identifiable information strictly confidential except as necessary for administrative enforcement through the rules of discovery in a civil action. However, the DFEH may develop and publish annual aggregate reports based on the data obtained provided said reports are “reasonably calculated to prevent the association of any data with any individual business or person.”

Source: Fisher Phillips 10/1/20, Seyfarth Shaw 9/30/20