California’s DFEH Provides Guidance on Pay Data Reporting

The California Department of Fair Employment and Housing (DFEH) provided much-anticipated guidance on completing the first Pay Data Report, which is due by March 31, 2021. Additional information regarding the report is expected to be available later this month. This serves as an update to the October 9, 2020 lawflash.

Senate Bill 973 signed into effect on September 30, 2020 and codified as Government Code Section 12999, requires private employers with more than 100 employees to submit an annual Pay Data Report to the DFEH, with the first report due by March 31, 2021.

Reporting Method: The report must be submitted using the DFEH’s Pay Data Submission Portal, which will be available by February 16, 2021. The DFEH has made the user guide and report template available on its website. Once the portal is live, employers must submit the report via the online portal as the DFEH will not accept reports by email or hard copy.

Covered Employers: The DFEH has clarified that the new law applies to private employers with 100 or more employees in the United States who are required to file an annual, federal EEO-1 report. Government Code Section 12999 does not specify whether the 100-employee requirement includes California employees only or all US employees, but the DFEH’s guidance requires any employer that employs 100 or more employees in the aggregate “inside and outside of California” to submit the report. For example, if an employer has 50 employees inside California and 50 outside of California during the Reporting Year, it would be required to submit the report.

Employers must include part-time employees as well as employees on leaves of absence in the count. Employers must also count temporary workers provided by a staffing agency or independent contractors if the individuals are included in the employer’s payroll and if the employer is required to withhold federal social security taxes from those individuals’ wages. If an employee resigned or was terminated before December 31 of the Reporting Year, the employee should still be counted and included in the report if the employee was active during the “Snapshot Period” (a single pay period of the employer’s choosing between October 1 and December 31 of the Reporting Year).

Multiple-Establishment Employers: The DFEH has clarified that employers must provide data for their employees assigned to California establishments and/or working within California, and may include their other employees outside of California. For multiple-establishment employers with establishments only in California, the DFEH expects the employer will provide data for all employees (including any employees who reside outside of California) whether or not teleworking as part of its establishment-level data. However, for those multiple-establishment employers with establishments both inside and outside of California, the employer: (A) must report data that is broken down by its California establishments, including all of its employees assigned to those establishments (and any employees outside of California reporting into that establishment) whether or not teleworking, and any other California employee (including those teleworking from California but assigned to an establishment outside of California), and (B) may report on any establishments and employees not covered by (A).

Report Contents: The DFEH has updated the requirements for the report contents to include the following during the Snapshot Period:

1. Number of employees categorized by race, ethnicity, and sex in each of the following 10 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
2. Number of employees by race, ethnicity, and sex whose annual earnings (annual reported W-2 pay for the Reporting Year regardless of hours the employee worked) fall within each of the pay bands used by the US Bureau of Labor Statistics in its Occupational Employment Statistics survey
3. Total number of hours worked by each employee plus the hours the employee was on any form of paid time off for which the employee was paid by the employer (such as vacation, sick, or holiday time) counted in each pay band during the Reporting Year. Guidance on how to calculate hours for exempt and non-exempt employees can be found here
4. The Reporting Year and the dates of the Snapshot Period selected by the employer.
5. The employer’s name, parent company name(s), address, headquarters’ address (if different), California and federal Employer Identification Number, North American Industry Classification System (NAICS) code, Dun 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
6. For employers with multiple establishments (defined as “an economic unit producing goods or services”), the report must contain each establishment’s name, address, number of employees, and major activity
7. Any clarifying remarks
8. A certification from the employer that the information contained in the pay data report is accurate. If the employer is using a Professional Employer Organization (PEO) to complete the report, it must nevertheless have an official from the employer certify the report (not someone from the PEO)
9. Contact information of someone who can be contacted about the report

Comparison to the EEO-1 Report: There are several key differences between the EEO-1 report and the California report. For example, the EEO-1 Component data collection from 2017 and 2018 had a binary reporting scheme for sex. Since California recognizes three genders (female, male, and non-binary) under the Gender Recognition Act of 2017 (Senate Bill 179), the DFEH created a third, non-binary category for reporting sex.

Also unlike the EEO-1 report that required employers to use W-2 Box 1 for purposes of identifying the appropriate pay bands for the employees, the DFEH is requiring employers to use W-2 Box 5 (unless the employee does not have wages reported in Box 5, as may be the case for H-2A visa holders; in which case, Box 1 may be used). Also unlike the EEO-1 report, the DFEH is requiring employers to include the time during which an employee was on any form of paid time off or paid leave for purposes of reporting the total hours worked.

Further, Government Code Section 12999 does not differentiate between establishment size. Thus, multiple-establishment employers must report all of their establishment-level data in a single report unlike the EEO-1 report, which allows employers to submit a “Type 6” list of establishments of fewer than 50 employees.

Another key difference is the inability to rely on EEO-1 submissions to satisfy pay data obligations this year. The California law permits employers to submit the EEO-1 report to the DFEH to satisfy the reporting requirements of Government Code Section 12999 if certain conditions are met. However, the EEOC is not collecting pay data at this time, so the EEO-1 report filed with the EEOC for Reporting Year 2020 will not contain the requisite same or substantially similar information. Thus, the EEO-1 report cannot be used to satisfy the obligations under Government Code Section 12999 for the first report that is due by March 31, 2021, and employers will need to submit the California report using the DFEH’s template.

30-Day Enforcement Deferral Period for COVID-19 Impact: For those employers who have been impacted by the pandemic, the DFEH will consider requests for a 30-day extension to file the report after the March 31 deadline. To seek an extension until April 30, 2021, employers must complete the DFEH’s online request form prior to March 31 stating the reason for the request. The DFEH will not entertain requests for extensions submitted via email or phone.

CONTACTS

If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:

Los Angeles
Max Fischer

Orange County
Barbara Miller