California’s New Employer Pay Data Reporting Requirements

The 2020 legislative session was, by far, one of the most unique in modern California history. Some major employment-related bills enacted this year include the California Family Rights Act expansion and a pair of COVID-19 reporting bills requiring employers to inform employees of positive COVID-19 tests as well as their workers’ compensation carriers. SB 973 is another reporting-related bill that will impact many larger employers’ reporting requirements.

SB 973 requires employers with 100 or more employees, that are also required to file the federal EEO-1 report with the Equal Employment Opportunity Commission (EEOC), to report the following demographic and pay data information to the California Department of Fair Employment and Housing (DFEH):

  1. The number of employees by race, ethnicity and sex in 10 different job title categories (Component 1); and
  2. The number of employees by race, ethnicity and sex, 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 (Component 2).

If these requirements sound familiar, it’s because this is the same Component 1 and 2 data that employers who filed an EEO-1 report with the federal government provided in 2019. In fact, SB 973 allows employers to file their federal EEO-1 report with the DFEH if the EEO-1 report contains the same or substantially similar information as required under SB 973. Unfortunately, because the EEOC discontinued collecting Component 2 data, an employer filing its 2021 EEO-1 report won’t fully comply with SB 973.

To comply with reporting Component 1 and 2 data under SB 973, employers will need to create a “snapshot” of their workforce. The “snapshot” is any single pay period of the employer’s choice between October 1 and December 31 of the reporting year. The “reporting year” is the year preceding the due date for the report. For example, under SB 973, the first report is due no later than March 31, 2021. So, the reporting year for that report will be 2020, which means an employer can choose any single pay period between October 1, 2020, and December 31, 2020.

Once the employer has created the snapshot, they’ll need to calculate the annual earnings, as shown on their IRS Form W-2, for each employee that was employed during the snapshot as well as the total number of hours each employee in the snapshot worked in the reporting year.

SB 973 authorizes the DFEH to enforce this reporting requirement with all covered employers and recover costs associated with that enforcement. So, employers should start preparing their payroll services, IT department and legal counsel now on how to comply with this new reporting requirement.

Finally, SB 973 leaves a few unanswered questions. The bill does not specify how the employer submits their reports to the DFEH, but requires the report to be in a format that allows the DFEH to “search and sort the information in the report using readily available software” without further detail on what that means. The DFEH has not yet provided any guidance on these issues, so employers should continue to check with the DFEH website and HRWatchdog for more details as they’re revealed.  

Matthew J. Roberts, Employment Law Counsel/Subject Matter Expert

CalChamber members can read more about EEO Reporting Requirements (including the EEO-1) in the HR Library. Not a member? See what CalChamber can do for you.

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