California Expands Pay Data Reporting Obligations for Large Employers

Currently, California requires large private employers that are subject to EEO-1 reporting obligations under federal law to also submit annual pay data reports to the California Civil Rights Division (CRD). Covered employers were permitted to satisfy pay-data reporting requirements by submitting a federal EEO-1 report, which included data on pay by establishment, job category, sex, race, and ethnicity.

A new law, Senate Bill 1162, revised California Government Code § 12999 to expand the number of data categories employers are obligated to report. As a result of this expanded requirement, employers with 100+ employees (only one of which needs to be employed in California) will no longer be able to submit EEO-1 reports in lieu of a pay data report to the CRD.

Currently, when reporting to the CRD, covered employers must include information about employees who work in the state of California, as well as employees who are assigned to a California establishment (e.g., a remote worker in Iowa who reports into a California office). Covered employers may report information about other employees to the CRD if they so choose, but they are not required to do so. This rule does not appear to be changing.

Like the EEO-1 report, the pay-data report to the CRD must include the number of employees by race, ethnicity, and sex in a number of broadly defined job categories, along with the pay bands. But now, California will require covered employers to include the mean and median hourly rate for each combination of race, ethnicity, and sex. Consolidated reports are no longer allowed; each establishment (defined as an economic unit producing goods or services) will require a separate report. 

Also unlike the EEO-1 report — and likely of most interest to large employers — is the fact that private employers with 100 or more employees hired through labor contractors must submit a separate pay-data report for the employees hired through labor contractors. Under the law, labor contractors are individuals or entities that supply, either with or without a contract, a client employer with workers to perform labor within the client’s usual course of business. This report must include pay data and the ownership names of all labor contractors used to supply employees.

The first pay data report will be due on May 10, 2023 and for the following years the report will be due on the second Wednesday of May. Employers who fail to comply with the California pay data reporting requirements may be ordered to comply and to pay costs associated with said order. Courts may also impose fines of up to $100 to employers who initially fail to file a report — and then up to $200 for subsequent failures.

How should employers get ready for this?

• Ensure that teams responsible for preparing EEO-1 reports are aware of this new requirement and have the ability to compile the necessary information. This may require HRIS systems to be re-configured to allow for reports to be run by establishment rather than company-wide.
• Work with your finance, vendor contract, contingent worker, or other teams to make sure the teams responsible for the pay-data report know about all labor contractors that are being paid so you can assess whether the labor contractor report requirement applies to you. If you don’t have a centralized contingent worker program, you may want to implement such a program to allow for easier tracking — and reporting — of contingent workers. Such a program can also mitigate risk of misclassification and joint-employment claims if implemented appropriately with the help of Legal and HR.
• If you have to file a labor-contractor report, ensure all labor contractors are able to provide you with the requisite pay data. Start those discussions with labor contractors early since an inability to secure pay data from contractors could expose your company to penalties.
• Include language in contracts with labor contractors requiring them to provide the requisite pay data well in advance of the report deadline.