CA Law Requires Employers to Submit Annual Pay Data Reports

A recent bill in California requires private employers to submit annual “wage data reports” to the Department for Fair Employment and Housing (“DFEH”) from March 2021. California law implements a previously announced program that the Trump administration expands on federal reporting requirements to include salary data for employees by race, gender, and ethnicity.

What is the purpose of SB-973?

The stated purpose of SB-973 is to combat discriminatory wage practices. To that end, the new law empowers the DFEH to investigate and prosecute complaints related to wage differentials that violate Section 1197.5 of the California Labor Code. However, opponents of the law point out that the data is prone to false positives as the data collected offers a simplified view. Individuals within the broad groups may not be doing essentially similar work, and W-2 data can easily reflect differences that are non-discriminatory.

Who is subject to SB-973?

The law applies to California private employers who (1) have 100 or more employees and (2) federal law is required to file an annual employer information report (also known as an “EEO-1 report”). The law is unclear whether the 100 employees must work in California for an employer to be subject to this law or whether an employer with 100 employees is subject to this law while an employee works in California.

What does the SB-973 need?

On or before March 31, 2021 (and on March 31 thereafter), insured employers must submit a wage data report that includes the following information:

(1) Number of employees by race, ethnicity and gender in each of the 10 specified occupational groups;

(2) The number of employees by race, ethnicity, and gender whose annual earnings (based on their W-2 for the year) fall within each of the wage bands used by the U.S. Department of Labor Statistics for Employment Statistics Survey. The employer must also state the total number of hours worked by each employee, as counted in each pay band.

An employer with more than one company must submit a separate report and a consolidated report for each company that includes all employees. Employers can add clarifying comments as they see fit. Employers can also submit their federal EEO-1 reports containing the same or substantially similar data instead of creating a new report for the DFEH.

Another important, but unanswered, question is whether the data can be limited to an employer’s California employees. SB-973 does not specifically limit its scope to California workers. By giving employers the ability to comply with this law by filing their EEO-1 reports, it is suggested that California expects employers to submit data for all employees, including those outside of California. On the other hand, the DFEH shouldn’t need statewide data to enforce Section 1197.5 of the California Labor Code, the stated purpose of the law.

Is the Pay Data Report confidential?

SB-973 appears to make the payment data reports confidential in most cases. The law prohibits the DFEH from disclosing “individually identifiable information” unless this is necessary for the purposes of enforcement proceedings. The law defines “individually identifiable information” as “data transmitted in accordance with this section and associated with a specific person or company”. This should mean that a third party cannot obtain payment details for a specific person or company via a public record law request. However, the legislative findings in support of SB-973 suggest that the wage data reports could be exposed through normal discovery in a civil lawsuit.

What is the takeaway?

Starting March 31, 2021, DFEH will have access to employee salary data based on race, ethnicity and gender. This makes it much easier for this government agency to prosecute suspected violations of the California Equal Pay Act. Employers subject to SB-973 should now review their equal pay practices while there is still time to resolve any wage differentials that could later lead to enforcement action.

Copyright © 2020, Hunton Andrews Kurth LLP. All rights reserved.National Law Review, Volume X, Number 279

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