On November 23, 2020, the California Department of Fair Employment and Housing (“DFEH”) released guidance in the form of Frequently Asked Questions (“FAQs”) regarding Senate Bill 973 (“SB 973”). SB 973 applies to private employers that: 1) employ 100 or more employees and 2) are already required to file an annual Employer Information Report (EEO-1) pursuant to federal law. These employers must submit a pay data report that contains specified wage information covering the prior calendar year to the DFEH on or before March 31, 2021, and annually thereafter. In essence, California has revived what is the equivalent of EEO-1 pay data collection that was discontinued on a federal level. SB 973 also authorized the DFEH to use this data as a mechanism to enforce the Equal Pay Act (Labor Code section 1197.5), which prohibits unjustified pay disparities. 

While the FAQs help clarify employer’s reporting responsibilities, a number of important questions remain unanswered and we anticipate further guidance from the DFEH closer to the first reporting deadline. This article summarizes what we have learned so far about the employer requirements.

Do the reporting requirements apply only to employers with 100 or more employees in California or 100 or more employees nationwide?

The DFEH clarified that employees located both inside and outside of California are counted toward an employer’s 100 employee threshold and provides the following example:

An employer that had 50 employees inside California and 50 employees outside of California during the Reporting Year would be required to submit a pay data report to DFEH. An employer with no employees in California during the Reporting Year would not be required to file a pay data report with DFEH. See DFEH FAQ, Section III. Required Content.

Are part-time employees counted for purposes of the 100 or more-employee threshold?

The DFEH clarifies that part-time employees are counted the same as full-time employees for purposes of the 100-employee threshold. Employees on paid or unpaid leave, including California Family Rights Act (CFRA) leave, pregnancy leave, disciplinary suspension, or any other employer-approved leave of absence, are also counted.

For example, for counting purposes, an employer has 100 employees when 60 individuals work every day and 40 individuals work alternate days to fill 20 positions, and there are no more than 80 individuals working on any working day. See DFEH FAQ, Section III. Required Content.

In what circumstance will an employer with fewer than 100 employees be required to submit pay data reporting?

The DFEH states that consistent with federal EEO-1 filing requirements, an employer with fewer than 100 employees is required to file with the DFEH if the company is owned or affiliated with another company, or there is centralized ownership, control or management so that the group legally constitutes a single enterprise, and the entire enterprise employs a total of 100 or more employees. See DFEH FAQ, Section III. Required Content.

Are there different types of pay data reports?

There are two types of pay data reports: establishment reports and consolidated reports. An employer that has a single establishment will submit to the DFEH one pay data report covering all employees. An employer that has multiple establishments will submit to the DFEH one pay data report for each individual establishment and one consolidated report. “Establishment” is defined as “an economic unit producing goods or services.” For example, an employer’s headquarters is an establishment for the purposes of pay data reporting to DFEH.

What is the “Reporting Year”?

A pay data report must cover the prior calendar year, which, is referred to as the Reporting Year. For example, a pay data report submitted to DFEH in 2021 will cover calendar year 2020; 2020 is the Reporting Year.

What is the “Snapshot Period”?

The “Snapshot Period” is a single pay period between October 1 and December 31 of the Reporting Year. Employers are free to choose a single pay period between October 1 and December 31 that will serve as their Snapshot Period. The Snapshot Period is then used to identify the employees to be reported on the pay data report for that calendar year.

How should employers consider employees teleworking outside of California for purposes of pay data reporting?

When reporting to the DFEH, employers must include data for employees assigned to their California establishments and/or working within California. Employers may, but are not required, include data for their other employees. The DFEH outlines the expectations for employers, depending on their circumstances, as follows:

For single-establishment employers: The DFEH expects that a single-establishment employer in California will include on its pay data report all employees (including any employees outside of California) whether or not they are teleworking.

For multiple-establishment employers: The DFEH expects that a multiple-establishment employer with establishments only in California will include in its individual establishment reports, as well as in a consolidated report, all employees (including any employees outside of California) whether or not they are teleworking.

For multiple-establishment employers with establishments both inside and outside of California: The DFEH expects the employer to:

  • (A) report to DFEH on its California establishments, all of its employees assigned to those establishments (including any employees outside of California) whether or not teleworking, and any other California employee (including those teleworking from California but assigned to an establishment outside of California); and
  • (B) may report to DFEH on its establishments and employees not covered by the previous description under (A).

For example, if an employer has one establishment in California with 50 employees (with three workers telecommuting from Nevada during the Snapshot Period) and one establishment in Nevada with 50 employees (with three workers telecommuting from California during the Snapshot Period), the employer will submit the following:

  1. an establishment report for their California establishment that covers all 50 employees, including those teleworking from Nevada;
  2. an establishment report for their Nevada establishment that covers either only the employees teleworking from California or all 50 employees assigned to the Nevada establishment; and
  3. a consolidated report that includes either all 53 employees in/assigned to California or all 100 employees.

See DFEH FAQ, Section III. Required Content.

If employees telework from California, but are assigned to an establishment outside of California, should they be included on the pay data report?

Yes. Employers should report such employees on an establishment report that covers either only those employees teleworking from California and who are assigned to a single establishment outside of California or all employees assigned to that establishment outside of California. Here is an illustrative example:

If an employer has 100 employees assigned to an establishment in Oregon (five of whom are teleworking from California during the Snapshot Period) and 100 employees assigned to an establishment in Arizona (five of whom are teleworking from California during the Snapshot Period), the employer will submit the following:

  1. an establishment report for the Oregon establishment that covers either the five employees teleworking from California or all 100 employees at the establishment; 
  2. an establishment report for the Arizona establishment that covers either the five employees teleworking from California or all 100 employees at the establishment; and
  3. a consolidated report that covers all ten employees teleworking from California or all 200 employees. 

See DFEH FAQ, Section III. Required Content.

What job categories must the pay data report include?

The pay data report (which tracks the federal EEO-1 format) must include the number of employees by race, ethnicity and sex in each of the following 10 job categories: 1) Executive or senior level officials and managers; 2) First or mid-level officials and managers; 3) Professionals; 4) Technicians; 5) Sales workers; 6) Administrative support workers; 7) Craft workers; 8) Operatives; 9) Laborers and helpers; 10) Service workers.

How should employers assign employees to a job category?

Employers should assign each employee to one of the ten job categories listed above. All jobs are considered as belonging in one of these ten categories. For consistency with federal EEO-1 reporting, employers should follow the EEO-1 Instruction Booklet.

What are the penalties for employers who fail to file?

If the DFEH does not receive the required report from an employer, they may seek an order requiring the employer to comply with these requirements and shall be entitled to recover the costs associated with seeking the order for compliance.

Employer Considerations

Employers’ pay data reports will allow DFEH to identify wage patterns for enforcement of equal pay or anti-discrimination laws. Therefore, employers subject to SB 973 should begin to prepare for the March 31, 2021, reporting deadline by compiling and organizing data to identify any issues prior to the first reporting deadline.

  • Sequoia Consulting Group clients may reach out to our partner, ThinkHR for additional guidance on pay data reporting.
  • Sequoia One PEO clients may reach out to their dedicated HR Business partner for more information about how Sequoia One assists clients with pay data reporting.

Additional Resources

Disclaimer: This content is intended for informational purposes only and should not be construed as legal, medical or tax advice. It provides general information and is not intended to encompass all compliance and legal obligations that may be applicable. This information and any questions as to your specific circumstances should be reviewed with your respective legal counsel and/or tax advisor as we do not provide legal or tax advice. Please note that this information may be subject to change based on legislative changes. © 2020 Sequoia Benefits & Insurance Services, LLC. All Rights Reserved

Lizet Ramirez – Lizet is a Client Compliance Manager for Sequoia One, where she works with our clients to optimize and streamline benefits compliance. In her free time, Lizet enjoys live music, travel, hiking and spa days.