California companies must report employee pay by race, gender under new law

By Mackenzie Hawkins 09/30/2020 11:55 PM EDT

Beginning in January, California companies with more than 100 employees must report pay data for all employees broken down by race, ethnicity and gender, after Gov. Gavin Newsom signed a bill on Wednesday.

The bill: CA SB973 (19R), by Sen. Hannah-Beth Jackson (D-Santa Barbara), requires companies to report the demographics of employees across all pay bands and job categories to the California Department of Fair Employment and Housing based on a single pay period snapshot between Oct. 1 and Dec. 31 of each year. Companies also have to report each of those employees’ earnings throughout the entire “reporting year”

— the calendar year prior to the data submission — regardless of whether they worked for a full 12 months.

SB 973 additionally authorizes the DFEH to seek an order requiring employers to comply with reporting requirements. The DFEH is also empowered to investigate and prosecute complaints alleging discriminatory pay practices.

While the department cannot publish individually identifiable information, it can publish aggregate reports of pay data. Pay data cannot be disclosed under the Public Records Act and must be maintained for at least 10 years.

Background: Since 1966, the federal Equal Employment Opportunity Commission has required employers with over 100 employees to submit EEO-1 forms that categorize employment data by race, gender and job category.

In 2016, the Obama administration added a pay reporting requirement to EEO-1 forms in an attempt to shed light on gender- and race-based pay discrimination. But the Trump administration halted that rule in August 2017 — six months before it was slated to take effect.

A federal judge overturned President Donald Trump’s stay of the Obama-era policy in March 2019, and one month later ordered companies to submit pay data for the years 2017 and 2018 by the following September. But the EEOC announced that month that it would not renew the rule on the grounds that it was burdensome and had no proven utility.

After Trump tried to end pay reporting before it began at the federal level, California legislators attempted to pass a statewide pay reporting requirement in 2018 and 2019. Neither bill made it out of the Assembly Appropriations Committee.

Arguments in opposition: Employer organizations including the California Chamber of Commerce opposed SB 973, arguing that aggregate data will likely demonstrate a wage disparity that does not actually violate civil rights law. This is because the bill requires pay reporting by job title, which employer organizations say fails to reflect whether the jobs are “substantially similar” for purposes of comparison.

What’s next: SB 973 takes effect on Jan. 1. Employers will need to submit pay reports for 2020 no later than March 31.

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