This is a sample of our 14 page FAQ document. Please contact info@coffmanbenefits.com to request a copy of the full document.

Employers that have any employees in California may be subject to a new state law that requires annual reporting, according to answers to frequently asked questions (FAQs) issued by the state’s Department of Fair Employment and Housing (DFEH) on Feb. 16, 2021.

The FAQs provide this and other information about Senate Bill 973 (SB 973), which requires employers to file information about their employees’ pay and work hours with the DFEH every year, starting in 2021. Specifically, the new requirement applies to every private employer that:

• Has 100 or more employees, at least one of whom works (teleworking or not) in California; and

• Is required to file the federal Employer Information Report (EEO-1) with the U.S. Equal Employment Opportunity Commission (EEOC).

This Compliance Overview provides selected portions of the DFEH’s FAQs.

• Introduction

  Why does California require large employers to report pay data to DFEH?

  The new law requires employers of 100 or more employees to report to DFEH pay and hours-worked data by establishment, job category, sex, race and ethnicity (hereinafter “pay data”). By creating a system by which large employers report pay data annually to DFEH, the state sought to encourage these employers to self-assess pay disparities along gendered, racial and ethnic lines in their workforce and promote voluntary compliance with equal pay and anti-discrimination laws. In addition, SB 973 authorized DFEH to enforce the California Equal Pay Act, which prohibits unjustified pay disparities. The California Fair Employment and Housing Act, already enforced by DFEH, prohibits pay discrimination. Employers’ pay data reports will allow DFEH to more efficiently identify wage patterns and allow for effective enforcement of equal pay or anti-discrimination laws, when appropriate.

  Where is California’s pay data reporting requirement codified in law?

  The pay data reporting requirement is contained in Government Code section 12999. In addition, DFEH intends to issue regulations implementing this statute consistent with DFEH’s existing regulations (California Code of Regulations, Title 2, Division 4.1).

  Will an employer’s pay data be publicly available?

  The new law prohibits DFEH, the California Division of Labor Standards Enforcement (DLSE) and their staff from making “public in any manner whatever any individually identifiable information obtained pursuant to their authority under this section prior to the institution of an investigation or enforcement proceeding by [DFEH and/or DLSE] under Section 1197.5 of the Labor Code or Section 12940 involving that information, and only to the extent necessary for purposes of the enforcement proceeding. For the purposes of this section, ‘individually identifiable information’ means data submitted pursuant to this section that is associated with a specific person or business.”

  In addition, the law provides that “any individually identifiable information” (defined above) submitted to DFEH shall be considered confidential information and not subject to disclosure pursuant to the California Public Records Act (Chapter 3.5 (commencing with Section 6250) of Division 7 of Title 1).

  May DFEH publish reports based on data aggregated from multiple employers?

  The law states that “[DFEH] may develop, publish on an annual basis, and publicize aggregate reports based on the data obtained pursuant to their authority under this section, provided that the aggregate reports are reasonably calculated to prevent the association of any data with any individual business or person.”

  How long will DFEH keep employers’ pay data?

  DFEH must maintain pay data reports for at least 10 years.

  How will DFEH keep the data submitted by employers secure?

  DFEH’s pay data reporting system uses end-to-end encryption for transmission and storage of all employer-submitted data. The system is housed in a secure government cloud environment that meets federal and state requirements for data protection.

  Does the federal government already collect pay data from large employers?

  The EEOC was ordered to and did collect these data for 2017 and 2018. Since then, the EEOC has stopped collecting these data.

• Filing Requirements

  Will DFEH’s pay data reporting system be similar to the one used by the EEOC to collect EEO-1 Component 2 data?

  To ease reporting by employers, DFEH is endeavoring to create a system that closely resembles the EEOC’s system to the extent permitted by state statute.

  What is the deadline for employers to submit their pay data report(s) to DFEH?

  Employers must submit their pay data reports to DFEH on or before March 31, 2021, and then on or before March 31 each year thereafter.

  May an employer receive an extension to file its pay data report after the March 31 deadline?

  The deadline for filing a pay data report with DFEH is annually on March 31. If DFEH has not received a required report by the deadline, DFEH “may seek an order requiring the employer to comply with [California’s pay data reporting] requirements and shall be entitled to recover the costs associated with seeking the order for compliance.”

  In light of the COVID-19 pandemic and the newly required pay data reporting under California law in 2021, DFEH will consider an employer’s request that DFEH defer seeking an order for compliance with respect to a report due by March 31, 2021.

  To request that DFEH defer seeking such an order for compliance (known as an “enforcement deferral period”), an employer must fill out DFEH’s online request form before March 31, 2021, providing the reason for the request and other required information. DFEH will not consider requests submitted through any other method, such as email or phone. Nor will DFEH consider a request submitted by a third party on behalf of an employer, such as a Professional Employer Organization (PEO); the employer itself must submit the request, and any approved enforcement deferral period will apply only to that employer. The request form is available here. An employer that is granted a deferral will have through April 30, 2021, to file its report with DFEH. Employers are advised to not expect that DFEH will, in future years, similarly defer seeking an order for compliance.

  How do employers submit their pay data reports to DFEH?

  DFEH’s pay data submission portal is available as of Feb. 16, 2021. The user guide for the portal and DFEH’s report template (including detailed instructions and examples) are also available now. Now that the portal is live, an employer may submit its pay data report either by uploading an Excel or .CSV file using DFEH’s template (suggested method) or by using the portal’s fillable form.

  Employers must use the online portal to submit their reports. DFEH will not accept reports by email or hard copy.

  Multiple-establishment employers must report all of their establishment-level data in a single report. Multiple-establishment employers do not report consolidated data. That is because a multiple-establishment employer must report on all of its establishments, including those with fewer than 50 employees, in the same manner, because the law does not differentiate between establishment size. In other words, DFEH does not permit employers to submit what is known in the federal EEO-1 survey as a “Type 6” list of establishments of fewer than 50 employees.

  What are the penalties for employers who fail to file?

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

• Required Content

  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 contain pay and hours-worked data from calendar year 2020 for employees employed during the Snapshot Period; 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 the single pay period between October 1 and December 31 of the Reporting Year that will serve as their Snapshot Period. As explained more below, the Snapshot Period is used by employers to identify the employees to be reported on in the pay data report submitted to DFEH.

  Some employers have noted that they have different pay periods (for example, some employees are paid bi-weekly and some are paid monthly) and have asked for guidance on how to pick their Snapshot Period. It is important to understand the purpose of the Snapshot Period. The Snapshot Period is not the period of time for calculating an employee’s pay or hours worked. Instead, the Snapshot Period is used by an employer only to identify its employees who must be reported on in the employer’s pay data report; an employer must pick a fixed period of time to identify the employees to be reported on because an employer’s employees will usually change over the course of the year. Importantly, when identifying the employees to be reported on, it does not matter whether an employee was paid during the Snapshot Period; it only matters whether the employee was employed during the Snapshot Period.

  For example, assume an employer has the same 200 employees for all of October 2020, and 100 employees are paid bi-weekly and 100 employees are paid monthly. Assume further the employer picks October 1 to October 15 as its Snapshot Period. For its pay data report, the employer would report on all 200 employees because they were all employed by the employer during the Snapshot Period, even if 100 of them did not receive pay in the Snapshot Period selected.

  Which employers are required to submit pay data reports to DFEH?

  The requirement applies to any private employer that has 100 or more employees and is required to file an annual EEO-1 Report pursuant to federal law. An employee is “an individual on an employer’s payroll, including a part-time individual, whom the employer is required to include in an EEO-1 Report and for whom the employer is required to withhold federal social security taxes from that individual’s wages.”

  An employer has the requisite number of employees if the employer either:

  • Employed 100 or more employees in the Snapshot Period chosen by the employer; or 

  • Regularly employed 100 or more employees during the Reporting Year.

  “Regularly employed 100 or more employees during the Reporting Year” means employed 100 or more individuals on a regular basis during the Reporting Year. “Regular basis” refers to the nature of a business that is recurring, rather than constant. For example, in an industry that typically has a three-month season during a calendar year, an employer that employed 100 or more employees during that season regularly employed the requisite number of employees and would be required to file a pay data report to DFEH, if the employer is also required to file an EEO-1 Report.

  Employees located inside and outside of California are counted when determining whether an employer has 100 or more employees. For 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.

  Part-time employees, including those who work partial days and fewer than each day of the work week, are counted the same as full-time employees. 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. 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 counted.

  Consistent with federal EEO-1 filing requirements, an employer with fewer than 100 employees is required to file with DFEH if the company is owned or affiliated with another company, or there is centralized ownership, control or management (such as central control of personnel policies and labor relations) so that the group legally constitutes a single enterprise, and the entire enterprise employs a total of 100 or more employees.

  What is a “private” employer? If our company is publicly-traded on a stock market, are we a required to comply with California’s pay data reporting requirement?

  The term “private employer” refers to any employer that is not a government employer. Regardless of whether the employer is publicly traded, a private employer is required to comply with California’s pay data reporting requirement if it has the threshold number of employees (inside and outside of California), at least one employee in California, and is required to file an EEO-1 Report.

  When determining whether an employer has 100 or more employees, does the employer count temporary workers provided by a staffing agency or independent contractors?

  The law defines “employee” to mean “an individual on an employer’s payroll, including a part-time individual, whom the employer is required to include in an EEO-1 Report and for whom the employer is required to withhold federal social security taxes from that individual’s wages.” If any temporary worker provided by a staffing agency or any independent contractor meets this definition of “employee,” then that individual is counted.

  Is an organization that files a federal EEO-3, EEO-4, or EEO-5 Report, and does not file an EEO-1 Report, subject to California’s pay data reporting requirement?

  No. California’s pay data reporting requirement only applies to employers that are required to file EEO-1 Reports.

  I did not file an EEO-1 Report in 2020 because the EEOC postponed the EEO-1 survey last year. Does that mean I do not need to file a pay data report with DFEH?

  No. A private employer that meets the threshold number of employees is subject to California’s pay data reporting requirement if it is required to file an annual EEO-1 Report pursuant to federal law. In determining whether an employer is required to file an annual EEO-1 Report, the question is not whether the employer actually filed such a report or when the employer filed it. Thus, an employer must file a California pay data report with DFEH for Reporting Year 2020 (by March 31, 2021) if the employer is subject to EEO-1 reporting requirements under law, regardless of whether and when the employer actually files its federal report.

  Are there different types of pay data reports?

  Whether a single-establishment employer or multiple-establishment employer, each employer will submit a single pay data report to DFEH.

  Multiple-establishment employers must report all of their establishment-level data in a single report. Multiple-establishment employers do not report consolidated data. That is because a multiple-establishment employer must report on all of its establishments, including those with fewer than 50 employees, in the same manner, because Government Code section 12999 does not differentiate between establishment size. In other words, DFEH does not permit employers to submit what is known in the federal EEO-1 survey as a “Type 6” list of establishments of fewer than 50 employees.

  Further, for California pay data reporting, a multiple-establishment employer’s headquarters is a distinct establishment reported in the same manner as other establishments.

  May a parent company submit a pay data report covering its subsidiaries?

  California’s pay data report is purposefully designed to cover a single employer, its component establishments (if it has more than one establishment), and its employees who are assigned to those establishments. For a parent company and subsidiaries that are required to file with DFEH, the parent company may – but is not required to – submit a pay data report covering itself and its subsidiaries only if the companies constitute a single legal entity. In such a filing, the parent company would be the “employer” in Section I of the report, and Section II would cover all of the parent company’s and subsidiaries’ establishments and employees being reported on (with the applicable FEIN and SEIN provided in the clarifying remarks field for each row).

  Alternatively, the parent company and subsidiaries may each submit its own pay data report. In such a filing by a subsidiary, for example, the subsidiary would be the “employer” in Section I of the report (and the parent company would be identified in the specified fields in Section I), and Section II would cover the establishments and employees of the subsidiary.

  If a parent company and its subsidiaries do not constitute a single legal entity, each separate company must file a separate report.

  Should an employer’s pay data report only include their California employees or all employees?

  When reporting to DFEH, employers:

  • Must include their employees assigned to California establishments or working within California; and

  • May include their other employees.

Thus, DFEH expects that a single-establishment employer in California will include on its pay data report all employees (including any employees outside of California) regardless of whether they are teleworking.

Similarly, DFEH expects that a multiple-establishment employer with establishments only in California will include across its establishment-level data in its report all employees (including any employees outside of California) regardless of whether they are teleworking.

For multiple-establishment employers with establishments inside and outside of California, the employer:

(A) Must 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 employees (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 (A). DFEH is providing employers with these options because one option may be less burdensome for employers than the other in light of federal EEO-1 reporting.

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 would submit a report with:

(1) Establishment-level data for their California establishment that covers all 50 employees, including those teleworking from Nevada; and

(2) Establishment-level data for their Nevada establishment that covers either only the employees teleworking from California or all 50 employees assigned to the Nevada establishment.

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

Yes.

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

Yes. An employer’s report must include establishments outside of California if any employee at that establishment is working from California during the Snapshot Period. For an establishment outside of California, the employer’s reporting would cover 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. DFEH is providing employers with these options because one option may be less burdensome for employers than the other in light of EEO-1 reporting.

For 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 would submit a report with:

(1) Establishment-level data for the Oregon establishment that covers either the five employees teleworking from California or all 100 employees at the establishment; and

(2) Establishment-level data for the Arizona establishment that covers either the five employees teleworking from California or all 100 employees at the establishment.

Should employees assigned to an establishment in California but who work at client sites outside of California be included in the employer’s pay data report?

Yes.