Seyfarth Synopsis: The California state assembly is set to vote on Senate Bill 171, a state analogue to the federal EEO-1 report, which would require employers with 100 or more employees to submit annual pay data reports to the Department of Fair Employment and Housing, broken down by gender, race, ethnicity, and job category.
Pay Data Reporting at the State and Federal Level
The California Legislature may be poised to pass a law that would require California employers to submit pay and hours data to the Department of Fair Employment and Housing ("DFEH").
This information is duplicative of "Component 2" of the federal EEO-1 report. The revised EEO-1 form was an Obama-era change to require employers with 100 or more employees to report W-2 wage information and total hours worked for all employees by race, ethnicity, and sex within 12 proposed pay bands.
When California Senate Bill 171 was first introduced in January 2019, the federal collection of pay and hours worked data was indefinitely stalled after the federal Office of Management and Budget ("OMB") stayed the implementation of the federal pay data collection portions of the revised EEO-1 Report. That decision prompted the National Women's Law Center and the Labor Counsel for Latin American Advancement to sue the OMB and the EEOC, and on March 4, 2019, a federal district court in Washington, D.C., issued an order reinstating the EEOC's collection of pay data as part of the EEO-1 Report.
SB 171 was initially touted as a groundbreaking effort to "ensure that [pay data by gender, race and ethnicity] will continue to be compiled and aggregated in California" despite the OMB's actions at the federal level. Now that Component 2 of the EEO-1 is moving full-steam ahead, with employers required to file pay and hours-worked data for 2017 and 2018 in September 2019, SB 171 appears to be redundant because it requires that the same data reported to the EEOC also be reported to the DFEH. SB 171 will be independently significant for California employers, however, if federal efforts to forestall Component 2 ever succeed.
What Pay Data Would be Required to be Reported to California?
SB 171 provides that by March 31, 2021 (and by each following March 31st), any private employer with 100 or more employees must file an EEO-1 report and the pay and hours-worked data to the DFEH. In response to the judicial reinstatement of the expanded federal EEO-1 report, SB 171 was modified to allow employers to submit a copy of their EEO-1, containing the same or substantially similar pay data information required by SB 171.
What's the Risk?
While the information submitted to the DFEH will duplicate data submitted on the federal EEO-1, there are still some significant things to watch for if SB 171 becomes law. First, while SB 171 would make the information submitted by any particular employer confidential and not subject to disclosure under the California Public Records Act, the DFEH can publish aggregate reports, so long as they are "reasonably calculated to prevent the association of any data with any individual business or person."
Second, SB 171 would require that the DFEH "make the reports available to the Division of Labor Standards Enforcement upon request." Given the DLSE's mandate to enforce California wage-hour laws and regulations (including California's Equal Pay Act), employers who fail to properly implement pay equity measures and report pay and hours data risk further scrutiny by the DLSE through field audits and investigations.
Third, the DFEH must maintain pay data reports for not less than 10 years—a period even longer than a California employers' retention obligation.
What Does This Mean for Employers?
Whether it be to fulfill federal or potential state requirements, many California employers will need to collect, aggregate, and report on employee diversity, pay, and hours. The future is clear: pay equity and pay equity reporting are here to stay. To remain ahead of the curve, employers should continue to work to ensure that pay is aligned across employees. If ever there was a time to develop and implement a pay equity strategy, now is it.
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