Asked and Answered: Updates on California’s Pay Data Reporting Law

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Seyfarth Synopsis: California’s Department of Fair Employment and Housing released 16 new FAQs regarding the recently enacted Pay Data Reporting Law, previously summarized here. The new FAQs address several key issues, including how to calculate the triggering 100-employee threshold and what the reporting requirements are for employees who work, live, or telecommute inside or outside of California.

Employers have anxiously awaited additional guidance from the California Department of Fair Employment and Housing (DFEH) regarding the implementation requirements of California’s recently enacted Pay Data Reporting Law (SB 973), codified at Government Code section 12999. The DFEH just released its newest FAQs, addressing threshold issues regarding who must file pay collection reports and which employees the reports must include.

The FAQs provide information needed to identify the employees covered by this new law. As described further below, a notable departure from the federal EEO-1 reporting requirements is that employers must consider not only where an employee “reports” but also where the employee lives.

Here, we dive into some of the key issues addressed in the new FAQs.

How Does My Company Calculate “100 Employees” To Know If We Must Report?

U.S. employees located inside and outside of California are counted when determining whether an employer has enough employees (100 or more) to trigger application of the Pay Data Reporting Law requirement. Thus, if an employer has at least one employee who lives or works in California, that employer must submit a report even if its 99 other employees work only elsewhere throughout the country.

The DFEH will determine an employer has the requisite 100 employees if either one of these two conditions appears:

(1) The employer employed 100 or more employees in the Snapshot Period chosen by the employer (i.e., the single pay period of the employer’s choice between October 1 and December 31 of the Reporting Year), or

(2) The employer regularly employed 100 or more employees on a “regular basis” during the Reporting Year.

(“Regular basis” refers to the “nature of the business that is recurring rather than constant.” For instance, in industries that have a “three month season during a calendar year,” a report would be required from those employers who regularly employed 100 employees or more during the season, so long as that employer is also required to file an EEO-1 report.)

Part-time employees count towards the 100-employee threshold. Temporary workers, including those from staffing agencies or independent contractors, do not count towards the threshold count unless the individual is on the employer’s payroll and the employer must withhold federal social security taxes from that individual’s wages.

Does The Report Include Only California Employees or All Employees?

Reports must include all employees who are assigned to California locations or who work or live in California. If an employee is assigned to a California location but works at a client site outside of California, then that employee should also be included in the report. The FAQs also consider that many employees telework, and sometimes in states other than their home state, as addressed below.

How Do I Comply If I Have Multiple Establishments Across Different States?

The reporting requirements affect employers that have multiple establishments across several states, so long as they have some establishments with employees in or assigned to California locations, or have employees living in California.  

  • Required Reporting: Employers must include all employees who work at or are assigned to a California establishment, even if the employee resides outside of California. Employers must also include California employees who telework from California to a non-California location. This requirement means that California employers must track where an employee resides, in addition to where the employee works or reports.
  • Optional Reporting for Non-California Establishments: The FAQs provide that employers may also report on non-California establishments and employees.

For example, where an employer has a California location with 50 employees (with three employees telecommuting from Nevada to California), and a Nevada location with 50 employees (with three employees telecommuting from California to Nevada), the employer must submit three reports:

(1) an establishment report for the California location that covers all 50 employees, including the three employees teleworking from Nevada (i.e., “reporting to” a California location);

(2) an establishment report for the Nevada location that covers either only the three employees teleworking from California or all 50 employees assigned to the Nevada establishment; and

(3) a consolidated report that includes either all 53 employees who work in or are assigned to a California location or all 100 employees.

The reporting requirement raises significant data privacy concerns, given that there is no threshold establishment size for reporting. As set forth in the FAQs, the example provided means that employers will need to choose between providing the State of California with information concerning its non-California workers, or providing pay data and hours worked data for very small employee counts, which could provide insight into the pay of specific employees.

What If Some of My Employees Telework?

As noted above, in addition to reporting on all employees who physically work in California, reporting is also required for those out-of-state workers who telework to a California location. In addition, those employees who reside in California must also be included in the pay data report, even if they are assigned to or teleworking for an out-of-state location. Accordingly, employers will need to implement a strategy for capturing data for everyone who works at or telecommutes to a California location, as well as those who live in California but telework to a non-California location.

How Do Employers Report Race, Ethnicity, and Sex?

Race and ethnicity should be reported consistent with the EEO-1 Instruction Booklet.

Consistent with California’s Gender Recognition Act of 2017, “sex” should be reported as female, male, or nonbinary. Self-reporting is the preferred method for collecting sex information.

What’s Next?

The DFEH will be releasing further guidance on reporting requirements related to pay, hours worked, multi-establishment employers, and acquisitions, mergers, and spin-offs. Although no timetable has been provided, we anticipate receiving additional guidance before the end of the year. For the time being, employers should continue preparing for compliance by

  • determining the employees and establishments on which the company will be required to report,
  • deciding how non-California employees and establishments will be reported,
  • collecting data needed to categorize employees’ race, ethnicity, and sex, and identifying whether gathering additional information is necessary, and
  • engaging the internal resources that will be necessary for purposes of completing the required reports, including understanding the pay bands that will be used for reporting purposes, available here.

Workplace Solutions

As the pay reporting requirements develop, we will continue to provide updates. For more information or for assistance with preparing for reporting, please contact any member of our Pay Equity Group or your favorite Seyfarth attorney.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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