Governor Newsom Signs Bill Requiring California Employers to Report Pay Data by Race, Ethnicity and Sex

On September 30, 2020, California Governor Gavin Newsom signed SB 973 into law. The law requires private employers with at least 100 employees to send a yearly report to the Department of Fair Employment and Housing (DFEH) detailing the number of employees in certain job categories and in certain pay bands based on race, ethnicity, and sex.  Covered employers are required to submit their first report by March 31, 2021.  These requirements mirror the federal EEO-1 "Component 2" filing that employers were required to submit to the US Equal Employment Opportunity Commission (EEOC) in 2019, which has been subsequently eliminated. The stated purpose of the bill is to further address pay inequities based on gender, race and ethnicity.

Covered Employers

The law applies to private employers with 100 or more employees who are required to file an annual Employer Information Report (EEO-1) under federal law. An "employee" under the law is an individual on an employer's payroll whom the employer is required to include in an EEO-1 Report and for whom the employer is required to withhold federal social security taxes.

Reporting Requirements

Covered employers are required to submit a pay data report to (DFEH) containing data for the prior calendar year. A covered employer may comply with the law by submitting a copy of the its EEO-1 report containing the same or substantially similar pay data information required by the law to DFEH.

Covered employers must report the following information to DFEH:

1. The number of employees by race, ethnicity and sex in each of the following 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
• Service workers

Covered employers should count individuals in these groups by looking at a single pay period of their choosing between October 1 and December 31 of the calendar year preceding the reporting date.

2. The number of employees by race, ethnicity and sex whose annual earnings fall within each of the pay bands used by the US Bureau of Labor Statistics in the Occupational Employment Statistics survey, based on the total earnings shown on the IRS Form W-2 for each employee in the calendar year before the reporting date.

3. The total number of hours worked by each employee counted in each pay band during the calendar year before the reporting date.

4. The employer's North American Industry Classification System code.

The report must be submitted to DFEH in a format that allows the department to search and sort the information using readily available software. Employers are permitted, but not required, to provide clarifying remarks regarding any of the information provided in the report.

Employers with Multiple Establishments

Covered employers with multiple establishments are required to file a report for each establishment, as well as a consolidated report that includes all employees.

How DFEH Will Maintain Reported Information

The law requires DFEH to maintain the pay data reports for a minimum of 10 years.

The law provides that any individually-identifiable information submitted to DFEH is considered confidential information and is not subject to disclosure pursuant to the California Public Records Act. The information may be made available as necessary for administrative enforcement or through the normal rules of discovery in a civil action.

DFEH is permitted to publish annual reports containing aggregate data, provided that the reports are reasonably calculated to prevent association of any data with any individual business or person.

Enforcement

If an employer does not submit the required report, DFEH is authorized to seek an order requiring the employer to comply and recover the costs associated with seeking the order.

When Employers Must Report

Covered employers must submit their 2020 reports on or before March 31, 2021, and subsequent annual reports will be due on or before March 31 each year thereafter.

© Arnold & Porter Kaye Scholer LLP 2020 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.