SB 973, a new California law passed in September 2020, created a new obligation for California employers to annually submit pay data report to the Department of Fair Employment and Housing (DFEH).  The DFEH has recently published a frequently asked questions page clarifying some questions about SB 973.  Here are five issues California employers must understand about this new reporting requirement:

1. Who must report pay data?

Private employers with 100 or more employees and who are required to file an annual Employer Report (EEO-1) under federal law are required to submit the payroll data to the DFEH.  The DFEH provides that the determination of 100 or more employees is made “if the employer either employed 100 or more employees in the Snapshot Period chosen by the employer or regularly employed 100 or more employees during the Reporting Year.”  The “Snapshot Period” is a single pay period between October 1 and December 31 of each year.

The DFEH states that an employer who has a three-month season during a calendar year and employs 100 or more employees during that season, would be deemed to have employed 100 or more employees, and must from the pay data report with the DFEH (as long as the employer is required to file the federal EEO-1 Report as well).

Employers with some employees working in California must count all employees, including those outside of California, in determining whether it reaches the 100 employee threshold.  Part-time employees are counted as if they were a full-time employee in determining the 100 employee threshold.  In addition, employees on leave, such as CFRA leave, pregnancy leave, disability leave, disciplinary leave, must also be counted.

2. What information must be reported?

Currently, the DFEH intends to collect the following information:

  1. The number of employees by race, ethnicity, and sex in each of the following ten job categories: Executive or senior level officials and managers; First or mid-level officials and managers; Professionals; Technicians; Sales workers; Administrative support workers; Craft workers; Operatives; Laborers and helpers; and Service workers. For purposes of establishing the numbers required to be reported under this paragraph (1), an employer shall create a “Snapshot” that tabulates the number of the individuals in each job category by race, ethnicity, and sex, employed during the Snapshot Period (see previous FAQ “What is the Snapshot Period?”).
  2. The number of employees by race, ethnicity, and sex, whose annual earnings fall within each of the pay bands used by the United States Bureau of Labor Statistics in the Occupational Employment Statistics survey. For purposes of establishing the numbers to be reported under this paragraph (2), the employer shall identify the total earnings during the Reporting Year, as shown on the Internal Revenue Service Form W-2, for each employee in the Snapshot, regardless of whether the employee worked for the full calendar year. The employer shall tabulate and report the number of employees whose W-2 earnings during the Reporting Year fell within each pay band.
  3. The total number of hours worked by each employee counted in each pay band during the Reporting Year.
  4. The Reporting Year, the dates of the Snapshot Period selected by the employer, the report type (establishment report or consolidated report), and the total number of reports being submitted by the employer.
  5. The employer’s name, address, headquarters’ address (if different), Employer Identification Number, North American Industry Classification System (NAICS) code, Duns and Bradstreet number, number of employees inside and outside of California, number of establishments inside and outside of California, and whether the employer is a California state contractor. If applicable, the name and address of the employer’s parent company or parent companies.
  6. For a multiple-establishment employer’s establishment reports, the establishment’s name, address, number of employees, and major activity.
  7. For a multiple-establishment employer’s consolidated report, the names and addresses of the establishments covered by the consolidated report.
  8. Any clarifying remarks.
  9. A certification that the information contained in the pay data report is accurate and prepared in accordance with Government Code section 12999 and DFEH’s instructions, and the name, title, signature, and date of signature of the certifying official.
  10. The name, title, address, phone number, and email address of someone who can be contacted about the report.

The FAQs also provide that pay data must also be included for employees who are teleworking outside of California but who are “assigned to an establishment in California.”

3. When must the payroll data be reported by?

Under Government Code section 12999(a), employers must submit their pay data reports to DFEH on or before March 31, 2021, and then on or before March 31 each year thereafter.

4. Why is pay data being collected by the state of California?

The DFEH’s website explains: “Employers’ pay data reports will allow DFEH to more efficiently identify wage patterns and allow for effective enforcement of equal pay or anti-discrimination laws, when appropriate. DFEH’s strategic vision is a California free of discrimination.”  SB 973 also authorizes the DFEH to enforce California’s Equal Pay Act set forth in Labor Code section 1197.5.

5. How can employers report the data?

The DFEH has indicated that employers will be able to report this data through on online portal being established.  The DFEH FAQs state that: “DFEH anticipates rolling out a secure online reporting system in advance of the 2021 filing deadline.”

There still are many questions about SB 973, and the DFEH will be updating its FAQ website as further guidance is established.