On September 30, 2020, Governor Newsom signed Senate Bill 973 requiring large employers to report certain pay and other data to the Department of Fair Employment and Housing (DFEH) by March 31, 2021 and annually thereafter. Specifically, SB 973 requires employers of 100 or more employees to report to DFEH pay and hours-worked data by job category and by sex, race, and ethnicity (hereinafter “pay data”).
The desire of the government to obtain pay information is nothing new. On January 29, 2016, President Obama announced a series of actions intended to close the gender pay equity gap, including proposed revisions to the EEO-1 form that would require the submission of detailed pay information. However, in August 2017, the Trump Administration put a halt to the implementation of this new rule.” Following a federal court ruling, the U.S. Equal Employment Opportunity Commission (EEOC) was ordered to and did collect these data for 2017 and 2018. Since then, the EEOC has stopped collecting the data.
However, there are some stark differences to the federal law. Under the Gender Recognition Act of 2017 (Senate Bill 179), California officially recognizes three genders: female, male, and nonbinary. Therefore, employers would be required to report employees’ sex according to these three categories. Employee self-identification is the preferred method of identifying sex information.
Gender identity information may be difficult to collect since California law prohibits employers from asking, either directly or indirectly, about an individual’s sex or gender. Therefore, job applications should not include any questions about an applicant’s sex or gender. For employers who must request information about sex or gender for legally required government reporting (such as EEO-1 Reports), the disclosure of that information must be voluntary. The prohibition on asking about gender was part of 2017 amendments to California’s Fair Employment and Housing Act that clarified and expanded protections for transgender individuals. There has been no guidance on how employers can properly ask each individual employee about their gender identification.
“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. See Cal. Code Regs., tit. 2, §§ 11008(d)(1) & 11008(d)(1)(A). Employees located inside and outside of California are counted when determining whether an employer has 100 or more employees. See Cal. Code Regs., tit. 2, § 11008(d)(1)(C). 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.
While the information collected will remain private, SB 973 also authorizes the Department of Fair Employment (“DFEH”) and housing to enforce the Equal Pay Act (Labor Code section 1197.5), which prohibits unjustified pay disparities. According to DFEH, 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. The Fair Employment and Housing Act (Gov. Code § 12940 et seq.), already enforced by DFEH, prohibits pay discrimination.
Employers who fail to report may be penalized. “If [DFEH] does not receive the required report from an employer, the department 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.” Gov. Code § 12999(h).
Daniel Thompson is an employment lawyer with Davis & Wojcik APLC, a Southern California based law firm with offices located in Temecula and Hemet. He is also the author of Land of Liability: A Guide for California Employers. He can be reached at (951) 652-9000.