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California Passes Law That Requires Employers to File Equal Pay Reports

On September 30th, California Governor Gavin Newsom signed Senate Bill 973 which requires private employers to submit an annual Pay Data Report to the Department of Fair Employment and Housing (DFEH). California has not published the final guidelines for reporting as of October 2020. The report must include specific pay data that is to be categorized by gender, race, and ethnicity. This bill is in response to the now rescinded, EEO-1 component 2 report.

Since 1966, the Equal Opportunity Commission (EEOC) has required that an Equal Employment Opportunity Report (EEO-1) be filed annually on a federal level.

The following companies must provide employment data categorized by race/ethnicity, gender, and job category:

  • Companies and federal contractors with 100 or more employees.
  • Companies and federal contractors with fewer than 100 if they are owned by or corporately affiliated with another company.
  • Companies and federal contractors with 50 or more employees and a prime contract or first-tier subcontract amounting to $50,000 or more.

All EEO-1 reports are filed annually, no later than March 31st.

During the Obama administration, a new addition to the EEO reports, component 2 was introduced.

Companies that were required to report component 2 data in addition to the original EOO-1 data, included:

  • Companies & federal contractors with 100 or more employees between October 1, 2017, through December 31, 2017.
  • Companies & federal contractors with 100 or more employees between October 1, 2018, and December 31, 2018.

This EEO-2 report included the compensation and hours worked for full and part-time employees on the employer’s payroll during those time frames mentioned above.

However, in February of 2020, a federal court ordered that the collection of component 2 data will no longer be required. When only 89 percent of eligible filers had submitted the data for component 2 by the proposed deadline, the EEOC asked the court to deem collection complete and no longer accepted those filings. On a federal level, EEO-1 data is still required to be annually reported. That is where Senate Bill 973 comes in. This bill is designed to act as a replacement for the component 2 data on a state level.

This state-mandated equal pay report must be filed annually before March 31st (the same deadline as the federal EEO-1 report) by companies with 100 or more employees to the DFEH.

The report must include:

  • The same data as the EEO-1 regarding number of employees categorized by race, ethnicity sex and job type.
  • Previous year W-2 earnings and hours worked for all employees.
  • If an employer has multiple establishments, it must include the required information for each establishment and a consolidated report for all employees.

In addition, employers can add clarifying remarks if necessary.

It also needs to be submitted in a sortable and searchable format and the data must be for the end of any pay period between October 1st and December 31st of the previous year (If reporting by March of 2021, the pay period will be from October 2020 through the end of December 2020).

The data on W-2 income should be reported by tallying the number of employees in each of the job categories (reported in the federal EEO-1) and detailing wages for each.

The bill authorizes the DFEH to seek an order requiring non-reporting employers to comply. However, it does not clarify if the minimum employee count includes employees that live out of state.

Is there anything Payroll Systems can help you with as you accommodate rapid legislation changes? Reach out and talk to us about easy-to-scale solutions you need for your business.

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This article provides general information and shouldn’t be construed as legal or HR advice. Since employment laws may change over time and can vary by location and industry, please consult a lawyer or HR expert for advice specific to your business. You can also contact Payroll Systems to inquire about our HR support services.