California has started to issue information, but questions remain.
To support California's new annual pay data reporting requirement, the California Department of Fair Employment and Housing (DFEH) has created a webpage on pay data reporting (https://www.dfeh.ca.gov/paydatareporting/). The webpage includes a link to the new law (SB 973), questions and answers organized by topic. Private employers with 100 or more employees and who are required to file an annual Employer Information Report (EEO-1) pursuant to federal law must submit a pay data report to DFEH by March 31, 2021 for the first time and annually thereafter.
The topics covered in the questions and answers are background information related to the new law (Introduction), Filing Requirements, and Required Content, which covers the specific information required on the new form. Several additional topic headings are listed as placeholders (Pay, Hours Worked, Multi-Establishment Employers, Acquisitions and Mergers, and Spinoffs) accompanied by the statement, "Guidance coming soon."
The DFEH will continue to issue additional information. In addition to updating the Pay Data Reporting page with more questions and answers, the DFEH still needs to issue regulations implementing the new law as well as the new form, an online reporting system, and corresponding technical specifications.
On September 30, 2020, California Governor Gavin Newsom signed into law Senate Bill 973, a new pay data reporting requirement. See our previous update California Enacts New Pay Data Reporting Requirement. Covered employers will have to provide California's DFEH with pay data by specified job categories and by race, ethnicity and sex. The reports will be due on an annual basis, starting March 31, 2021, for calendar year 2020.
Pay Data Report
Based on the information currently provided by the DFEH, the new California pay report mirrors much of the Equal Employment Opportunity Commission's (EEOC) now-halted EEO-1 Component 2 reporting requirement.
Under the new law, covered employers must submit a pay data report to the DFEH for the prior calendar year (the "Reporting Year").
An employer has the requisite number of employees 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. "Regularly employed 100 or more employees during the Reporting Year" means employed 100 or more individuals on a regular basis during the Reporting Year.
Employees located inside and outside of California are counted when determining whether an employer has 100 or more employees. The questions and answers provide an example of employees located inside and outside of California. An employer that had 50 employees inside California and 50 employees outside of California during the Reporting Year would be required to submit a pay data report to DFEH. An employer with no employees in California during the Reporting Year would not be required to file a pay data report.
Part-time employees, including those who work partial days and fewer than each day of the work week, are counted the same as full-time employees. Employees on paid or unpaid leave, including California Family Rights Act (CFRA) leave, pregnancy leave, disciplinary suspension, or any other employer-approved leave of absence, are counted.
The questions and answers also address affiliated companies in a manner consistent with federal EEO-1 filing requirements and how to count temporary workers provided by a staffing agency or independent contractors. For purposes of pay data reporting to DFEH, an employee means "an individual on an employer's payroll, including a part-time individual, 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 from that individual's wages." If any temporary worker provided by a staffing agency or any independent contractor meets this definition of "employee," then that individual is counted.
Employers will be required to report on all full- and part-time employees working during a "workforce snapshot period" — which is any pay period between October 1 and December 31 of the Reporting Year (e.g., between October 1 and December 31, 2020, for the report due March 31, 2021).
The report will include:
- The number of employees by race, ethnicity and sex in the workforce snapshot period, by EEO-1 job category.
- The number of employees by race, ethnicity and sex whose annual earnings fall within each of the pay bands the U.S. Bureau of Labor Statistics uses in the Occupational Employment Statistics survey ($19,239 and under, $19,240-$24,439, $24,440-$30,679, and so on). The earnings are calculated using the total earnings shown in Box 1 of the employee's IRS Form W-2 for the relevant reporting year.
- The total number of hours worked by each employee counted in each pay band during the Reporting Year.
One difference from the EEOC's current report and prior EEO-1 Component 2 reporting requirements pertains to gender. The EEO-1 report has historically had fields for male and female gender only. By contrast, the DFEH anticipates that the California pay data report will have three gender category fields: male, female, and non-binary.
The law states that employers with multiple establishments must submit a report for each establishment as well as a consolidated report that includes all employees. Employers also have the option to provide clarifying remarks concerning the information in the report, should they choose to do so.
Employers must provide the data in a form that allows the DFEH to search and sort the information using readily available software. At this point, the DFEH has not provided a specific form or template for filing the report.
If a covered employer fails to submit a pay data report, the DFEH may seek an order requiring compliance and will be entitled to recover costs associated with seeking the order.
ADP® is closely monitoring all activity related to the California pay data reporting requirement and will provide updates as information is made available. As a reminder, please subscribe to Eye on Washington for updates.
ADP Compliance Resources
ADP maintains a staff of dedicated professionals who carefully monitor federal and state legislative and regulatory measures affecting employment-related human resource, payroll, tax and benefits administration, and help ensure that ADP systems are updated as relevant laws evolve. For the latest on how federal and state tax law changes may impact your business, visit the ADP Eye on Washington Web page located at www.adp.com/regulatorynews.
ADP is committed to assisting businesses with increased compliance requirements resulting from rapidly evolving legislation. Our goal is to help minimize your administrative burden across the entire spectrum of employment-related payroll, tax, HR and benefits, so that you can focus on running your business. This information is provided as a courtesy to assist in your understanding of the impact of certain regulatory requirements and should not be construed as tax or legal advice. Such information is by nature subject to revision and may not be the most current information available. ADP encourages readers to consult with appropriate legal and/or tax advisors. Please be advised that calls to and from ADP may be monitored or recorded.
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Updated on December 21, 2020
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