Pursuant to SB 973, the pay data report must include a breakdown of employees by sex, race and ethnicity in 10 job categories.
On September 30, 2020, California Governor Gavin Newsom signed into law Senate Bill 973. Pursuant to SB 973, California employers with 100 or more employees are required to submit a “pay data report” to the California Department of Fair Employment and Housing (DFEH) by March 31, 2021.
What Are Employers Required to Report?
Pursuant to SB 973, the pay data report must include a breakdown of employees by sex, race and ethnicity in 10 job categories. Specifically, the categories include: executive or senior level officials or managers; first or mid-level officials and managers; professionals; technicians; sales workers; administrative support workers; craft workers; operatives; laborers and helpers; and service workers. The pay data report must also include a delineation of employee compensation in 11 identified pay bands ranging from “less than $19,239” to “more than $208,000” based on W-2 wages. The report must include the number of employees in each pay band, along with information on sex, race and ethnicity and total number of hours worked.
These requirements mirror the formerly required EEO-1 Component 2 filing, which employers were required to file in 2019 but has since been abandoned by the Equal Employment Opportunity Commission (EEOC). Interestingly, the EEOC announced its abandonment of this report due to the cost of collection (both by employers and the EEOC) as well as the lack of utility of the data reported. Specifically, as many experts have pointed out, W-2 earnings conflate the decisions of employees and employers, include taxable compensation earned in prior years, and do not account for earnings differences that arise from changes in employment during the year.
What Is California Going to Use the Data for?
The intent of the California Legislature is clear by its legislative findings—the Legislature believes a discriminatory pay gap persists despite other recent legislation and now requires additional attention from the state. DFEH will review the pay data reported to ferret out discrimination in pay and hold employers accountable for differences in pay that are not authorized by law.
What This Means for Employers
While many employers have been focused on COVID-19 issues, this is a reminder that employers still need to pay attention to other areas that potentially create liability and risk if compliance is lacking. Employers nationwide should be conducting a thorough analysis of their compensation and benefits practices. For an analysis to be helpful, it must take into consideration the various differences in state and federal law. When conducting these analyses, employers should consider engaging counsel to provide the maximum level of privilege possible and to ensure an appropriate strategy is developed for compliance in California as well as nationally.
For More Information
If you have any questions about this Alert, please contact Jennifer A. Kearns, Meredith Gregston, any of the attorneys in our Employment, Labor, Benefits and Immigration Practice Group or the attorney in the firm with whom you are regularly in contact.
Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.