Professional Employer Organizations and CA Pay Data Reporting

3 minute read

The deadline for submitting California pay data reports under SB 973 is rapidly approaching. By March 31, 2021, certain employers with California-based employees (including remote workers that report to California locations) must submit comprehensive pay data reports to the Department of Fair Employment and Housing (DFEH). These reports encompass information such as the following:

• Number of employees by race, ethnicity, and sex, in each of the following job categories: executive or senior-level officials and managers, first or mid-level officials and managers, professionals, technicians, sales workers, administrative support workers, craft workers, operatives, laborers and helpers, and service workers;
• Number of employees by race, ethnicity, and sex in each of the pay bands used by the U.S. Bureau of Labor Statistics and used in the Occupational Employment Statistics survey; and
• Total hours worked for each employee in each pay band.

To support covered employers in this new compliance obligation, the DFEH has been consistently updating its Pay Data Reporting Frequently Asked Questions site. A recent update to the FAQs, concerns professional employer organizations (PEOs).

For employers that rely on PEOs for compliance obligations, the Pay Data Reporting FAQs distinguish the function of PEOs in the reporting process. Specifically, a PEO may prepare and file a pay data report on behalf of a client. Notably, the client must certify the accuracy of the report, not the PEO. This creates extra concerns for businesses without the internal capabilities to create and submit pay data reports. 

It turns out the clear delineation of roles may actually be a benefit to employers. While PEOs can support employers in many aspects of their operations, pay data reporting requires expertise, both in equal pay laws and regulations, as well as data wrangling, that goes above and beyond the day to day compliance activities. This is because the new law is intended to establish strict, enforceable consequences for employers who engage in pay discrimination.

In addition to the provisions authorizing the DFEH to promulgate regulations to carry out SB 973, the DFEH also has express authority “to receive, investigate, conciliate, mediate, and prosecute complaints alleging practices made unlawful pursuant to Section 1197.5 of the Labor Code,” which is California’s Equal Pay Act. This includes the authority to issue subpoenas to require attendance at deposition and produce documents, to serve interrogatories and document requests, and to seek a court order to compel their compliance.  

The bottom line is that while organizations may rely on their PEO for support, in preparing and filing pay data reports, a vendor with specific pay equity expertise may be required because of the extra enforcement concerns. The right vendor can work in tandem with your PEO to ensure accurate pay data reporting that minimizes the risk to your organization. Employers should keep in mind the Triangle of Trust^SM: trust in data, trust in software, and trust in regulatory expertise. Click here to find out more about how Trusaic can help your organization achieve its pay equity goals. 

You can download and read our free white paper on pay data reporting here.