Apparently it is the fourth time that is the charm, as California Senate Bill (SB) 973 has been signed into law after three prior attempts, including a 2017 veto by former Governor Jerry Brown (when current Governor Gavin Newsom was Lieutenant Governor). The law effectively resurrects the EEOC’s infamous, and now defunct, EEO-1 “Component 2” pay data reporting requirement for California employers. The first “pay data report,” covering 2020 employee earnings, will be due by March 31, 2021. However, key details are still unknown.
The Known Unknowns
Employers with operations in California are being encouraged to “prepare now” for the new pay data report requirement, but those preparations can only go so far because the law lacks important details.
For instance, the separate states must have a “hook” for jurisdiction over a private employer, so this new law will only apply to employers with operations in California, but the scope beyond that will require clarification. The law may or may not include reporting for establishments and employees outside the state but is likely to exclude any overseas operations. The law does provide a definition of “employee” that should answer most questions regarding the inclusion of any U.S.-based foreign workers (included if the employer is withholding Social Security taxes).
Statistical Analyses?
The largest question on California employers’ minds is likely to be what, if anything, the state intends to do with these new pay data reports from a civil rights law enforcement perspective. Unfortunately, that too is unclear.
The law authorizes the Department of Fair Employment and Housing to collect the proscribed pay data, authorizes the agency to seek court orders compelling compliance if necessary, and directs the agency to make the data available to the Division of Labor Standards Enforcement upon request. Interestingly, the law does not appear to authorize any agency to perform statistical analyses of any specific employer’s data, much less initiate investigations based on the results of such analyses.
That is not to say the state could not decide to use the pay data reports for enforcement purposes at some point in the future, but any assumptions along those lines are, for now, just that—assumptions. For a much more robust discussion of what can be done with this data, read our previous blog entry by Dr. Dan Kuang here.
The California Pay Data Report
The new California “pay data report” is almost a carbon copy of the now defunct EEO-1 “Component 2” requirement. The main difference is the pay bands used for each, as detailed below.
Who Must File
California employers with 100 or more employees and who are required to file annual EEO-1 reports will be required to submit annual pay data reports for each “establishment” defined as “an economic unit producing goods or services.” California employers with multiple establishments will also be required to file a “consolidated” report covering all establishments.
Contents of Report
The pay data reports will include headcounts of employees by race/ethnicity and sex in the 10 familiar EEO-1 job categories:
- Executive or senior level officials and managers;
- First or mid-level officials and managers;
- Professionals;
- Technicians;
- Sales workers;
- Administrative support workers;
- Craft Workers;
- Operatives;
- Laborers and helpers; and
- Service workers.
For each of the above job categories, the employee headcounts are further broken down by pre-defined pay bands. However, California is not adopting the pay bands used for EEO-1 purposes. Rather, the law specifies the pay bands used in the current Occupational Employment Statistics survey administered by the Bureau of Labor Statistics which are slightly different.
For those who developed queries and programs for EEO-1 Component 2 purposes, the code will need to be adjusted to use the correct pay bands for California pay data report purposes. Here is a side-by-side comparison:
EEO-1 Component 2 | CA Pay Data Report | ||
---|---|---|---|
Under | $19,240 | Under | $19,240 |
$19,240 | $24,439 | $19,240 | $24,959 |
$24,440 | $30,679 | $24,960 | $32,239 |
$30,680 | $38,999 | $32,240 | $41,079 |
$39,000 | $49,919 | $41,080 | $53,039 |
$49,920 | $62,919 | $53,040 | $68,119 |
$62,920 | $80,079 | $68,120 | $87,359 |
$80,080 | $101,919 | $87,360 | $112,319 |
$101,920 | $128,959 | $112,320 | $144,559 |
$128,960 | $163,799 | $144,560 | $186,159 |
$163,800 | $207,999 | $186,160 | $239,199 |
$208,000 | And Over | $239,200 | And Over |
Check my work, though. The latest approved Occupational Employment Statistics survey can be found here.
Like the EEO-1 Component 2, the California pay data report uses total W-2 earnings to determine the pay band in which each employee is reported.
And like the EEO-1 Component 2, there will be a second portion—also broken down by race/ethnicity and sex within each job category and pay band—for reporting the total “hours worked” in the previous year. There is not yet guidance regarding how to report total hours for employees who are not required to track their hours, but it is likely they will adopt the same scheme as the EEOC and allow employers to estimate based on full- or part-time status.
Who is Included
The headcounts will be based on an employee “snapshot” representing any pay period between October 1 and December 31 of the prior year. The snapshot defines the reporting population for which total W-2 earnings will be reported. Note that the snapshot population is likely to include employees who did not work the full year. The California pay data report appears to require employers to report such employees based on the total amount of W-2 compensation actually earned, rather than “annualizing” their pay.
As noted above, it is unclear at this point whether and to what extent the law encompasses establishments beyond the California state borders. If not, another question should arise regarding employees who might not have worked in-state for the entire reporting year.
Data Privacy
While the EEOC has historically interpreted the Freedom of Information Act to exempt individual EEO-1 reports from disclosure, the issue is not so clear with the new California pay data reports. The law is particularly concerned with protecting individuals’ privacy and is explicit that any individually identifiable information will not be subject to disclosure pursuant to the California Public Records Act. Otherwise, agencies are instructed to make the records available for inspection “unless an exemption from disclosure applies.”
More to Come
As noted above, there are still a significant number of “known unknowns” that must be addressed before California employers can take many meaningful steps to prepare for the first filing on March 31, 2021. And, of course, there are always the “unknown unknowns” to watch out for as guidance is developed and released.
BCGi will continue to monitor for developments.