The California legislature just took the matter of gender and race/ethnicity pay gaps into its own hands by mandating employer pay information reporting.
This action follows in the wake of the controversial federal pay reporting initiative becoming bogged down in litigation and meeting with substantial expense and privacy-related opposition, leading to the eventual pausing of data collection efforts by the Trump administration’s Equal Employment Opportunity Commission (EEOC). As we previously explained, under the federal initiative, the EEOC was to require all private sector employers with 100 or more employees, and certain other employers, such as those contracting or first-tier subcontracting with the federal government, that annually file an EEO-1 report to provide additional information containing company employment data categorized and reported by race/ethnicity, gender and job category.
With that federal pay data collection at a standstill, on September 30, 2020, California generated its own reporting requirement by passing Senate Bill No. 973, which provides that private employers with 100 or more employees that are required to file an annual EEO-1 under federal law must submit to the state, on or before March 31, 2021, and each year thereafter, a pay data report covering the prior calendar year that includes the number of employees by race, ethnicity, and sex. The data must fall within:
- Each of 10 enumerated job categories; and,
- Each of the “pay bands” of annual earnings used by the U.S. Bureau of Labor Statistics, along with the total number of hours worked by each employee counted in each pay band.
The bill also authorizes the California Department of Fair Employment and Housing to investigate and prosecute discriminatory wage rate complaints.
Additionally, the bill also includes several optional mechanisms that employers may wish to use, such as:
- Complying by submitting to the state a copy of the employer’s EEO-1 containing the same or substantially similar pay data information for the reporting year; and,
- Including clarifying remarks regarding information provided in their reports, such as employee seniority or performance figures or other information explaining legitimate and lawful reasons for paying some employees more than others.
California’s legislature explicitly states in Section 4 of SB 973 that this wage data collection program is to further its goal of “achieving equal pay for women and people of color.”
We suspect that other states may pass similar legislation under the banner of the same goal, particularly while the status of federal reporting remains questionable (though if the White House changes parties next month, the federal requirement may be revived). Therefore, it appears certain that employers across the country must continue to stay tuned to this issue.