DFEH Adds New Guidance for SB 973 Reporting Due on March 31

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California’s Department of Fair Employment and Housing (DFEH) recently released additional FAQs to assist employers in submitting pay data reporting under SB 973 to the DFEH.

Under SB 973, beginning this year, private employers with at least 100 employees and required to file an annual Employer Information Report (EEO-1) are required to submit pay data reporting on an annual basis, starting with the first deadline of March 31, 2021. 

In early November 2020, the DFEH initially issued FAQs to provide guidance of California’s pay data reporting. This included an overview of the reporting requirements, including detail of where those requirements were codified, the extent to which the underlying data could be accessible by the DFEH and the Division of Labor Standards Enforcement (DLSE), and the ability of the DFEH to publish aggregated reports provided that such reports are reasonably calculated to prevent the association with any individual identifiable information of a person or business. The FAQs also included guidance as to the filing requirements and DFEH’s anticipation of providing forms for employers’ use. 

Later in November 2020, the DFEH added additional FAQs to provide further guidance as to the content of California’s pay data reporting as to scope of the information to be reported and the scope of covered employers. The FAQs make clear the content of California’s pay data reporting will be similar to the former EEO-1 Component 2 pay data reporting with some differences, including the requirement to account for employees who are of nonbinary gender. A key clarification of the scope of California’s pay data reporting was the inclusion of any employer that reaches the 100 employee count with at least one employee in California. Additionally, the employee count includes all employees, including a part-time employee and anyone else that fits within the definition of an individual for whom an 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. All employees who telework in California but are assigned to an establishment outside of California and vice versa must be included in the reporting. Multiple-establishment employers must provide a report for each establishment as well as one consolidated report.

More recently, on January 7, 2021, the DFEH updated the FAQs to include additional guidance on how pay and hours worked are to be calculated as well as rules on multi-establishment employers. 

In determining pay, a key difference between California’s pay data reporting and the EEO-1 Component 2 pay data reporting is California’s requirement to use W-2 Box 5 instead of W-1 Box 1. If W-2 information is corrected after the California pay data report is submitted and that correction results in changes in the report, e.g., moving from one pay band to another pay band, the employer will need to submit a corrected report with an identification of the corrected cells and an explanation of the correction.

 In determining hours worked, unlike the EEO-1 Component 2 pay data reporting which requires the exclusion of paid leave when calculating hours worked, California’s pay data reporting requires the inclusion of time during which an employee was on any form of paid time off for which the employee was paid by the employer. Hours should not be annualized for those employees who did not work the full reporting year.

With respect to multi-establishment employers, the FAQs clarify the rules for an employer with multiple establishments in and outside California. An establishment means an “economic unit producing goods or services.” This is similar but not identical to the EEO-1’s definition, which is “generally a single physical location where the business is conducted or where services or industrial operations are performed…” In any event, the FAQs make clear that employers should use the same establishments that they use for their EEO-1 reports. A multi-establishment employer will be required to submit one establishment report for each establishment, even if some of them have fewer than 50 employees, and one consolidated report. However, an employer is not required to submit an establishment report for those establishments that have no employees in California.  

The FAQs are anticipated to be further updated, particularly in the topics of acquisitions and mergers and spinoffs.

The DFEH indicated that the User Guide and Template will be available by February 1, 2021, and the Data Submission Portal will be available on February 15, 2021.