California SB 973 – Agency Update

At a Glance

• California Legislature passed SB 973 requiring employers to file an annual compensation data report by March 31 of each year.
• Please see the original announcement here.
• The agency has published additional FAQ, which can be reviewed here.

Introduction

On September 30, 2020, California legislation enacted Senate Bill 973. This law now makes it a requirement that large employers must report certain pay and other data to the Department of Fair Employment and Housing (DFEH) by March 31, 2021 and annually thereafter.

Who Is Required to File and Who Must Be Reported

The agency published an FAQ document clarifying who is required to file the annual compensation data. The requirements are as follows.

• Employers with 100 or more employees during the snapshot period or regularly employees 100 or more employees are required to file an EEO-1 must file a report with DFEH.
• Employees located inside and outside of California are counted when determining if an employer has 100 or more employees are included.
• This includes part-time individuals, and individuals on paid and unpaid leave, including CFRA, pregnancy leave, disciplinary suspension, or any other employer approved leave of absence.

Note: Employers who have NO employees in California during the reporting year are not required to file.

For employees who telework and individuals that reside outside of California but report to a California establishment must be included in the pay data. Employees who reside in California but report to an establishment outside of California must be included in the pay data report.

Also, employees who are assigned to an establishment in California but who work at client sites outside of California, are required to be included in the report.

Single and Multiple Establishment Reports

The agency has also clarified who is required to file a single establishment report and who is required to file a multi-establishment report for pay data.

• An employer that has a single establishment will submit to DFEH one pay data report covering all employees.
• An employer that has multiple establishments will submit to DFEH one pay data report for each establishment and one consolidated report.

Note: An employer’s headquarters is an establishment for the purposes of pay data reporting to DFEH.

For multiple-establishment employers with establishments inside and outside of California, the employer:

(A) must report to DFEH on its California establishments, all of its employees assigned to those establishments, including any employees outside of California, whether or not teleworking, and any other California employee, including those teleworking from California but assigned to an establishment outside of California; and

(B) may report to DFEH on its establishments and employees not covered by (A).

The employer’s consolidated report must include the establishments and employees under (A) and may include the establishments and employees under (B). DFEH is providing employers with these options because one option may be less burdensome for employers than the other in light of federal EEO-1 reporting.

Required Data

Employers are required to select a snapshot period, a single pay period from October 1 to December 31 of the prior year, providing their employee demographic information and pay data for that period. Employers must report employee race, ethnicity, and sex in the ten job categories set by the EEO-1.

Employers must report employees who fall within the pay bands established by the U.S. Bureau of Labor and Statistics, the employer shall tabulate and report the number of employees whose W-2 earnings during the Reporting Year fell within each pay band.

Even if an employee resigned or was terminated before December 31 of the Reporting Year, the employee should be reported on if the employee was employed during the Snapshot Period.

Under the Gender Recognition Act of 2017 (Senate Bill 179), California officially recognizes three genders: female, male, and nonbinary. Therefore, employers should report employees’ sex according to these three categories. Employee self-identification is the preferred method of identifying sex information.

Next Steps

At this time the agency has not selected a provider for filing and file specifications. As additional information becomes available Paylocity will keep our clients informed.

Employers can prepare to file by reviewing their current employees’ configurations and confirming that employees are assigned an EEO class, gender, and ethnicity. If an employee has not previously indicated their ethnicity or gender, an employer is permitted to perform a visual observation of the employee or to use prior employment records to assign an ethnicity or gender to the employee.

Clients can review the Paylocity report “EEO and Equal Pay Data Review Report” to assist in the preparation of employee data but this is not the report that will be filed at the agency level.

Should you have any questions please contact your Paylocity Account Manager.

Thank you for choosing Paylocity as your Payroll Tax and HCM partner.

This information is provided as a courtesy, may change and is not intended as legal or tax guidance. Employers with questions or concerns outside the scope of a Payroll Service Provider are encouraged to seek the advice of a qualified CPA, Tax Attorney or Advisor.