California Senate Bill 973

California Law Requires Employers to File an Equal Pay Report

Pay data reporting in California just became law. California Senate Bill 973  was signed by Governor Gavin Newsom requiring an Equal Pay Report that is very similar to the rescinded EEOC EEO-1 Component 2 pay data report. The new report is due by March 31, 2021 and annually thereafter on March 31st.

California’s SB 973 represents the basic definitions and contents of EEOC’s component 2 pay and hours worked report. For example, a private employer with at least 100 employees and who is required to report to an annual “Employer Information Report” (EEO-1 Component 1) under federal law will be required to submit a pay data report of their workforce akin to Component 2 for the prior calendar year referred to as the “Reporting Year”. Therefore, for the March 31, 2021 submission, employers will use an employee workforce snapshot from a single payroll period between October 1, 2020 and December 31, 2020, i.e. the Reporting Year.

The report has two sections, pay data and hours worked. Each section will include the number of employees by race, ethnicity, and sex for each of the current 10 job categories that are identical to the Component 2 report: 1A. Executive or senior-level officials and managers, 1B. First or mid-level officials and managers, 2. Professionals, 3 Technicians, 4. Sales workers, 5. Administrative support workers, 6. Craft workers, 7. Operatives, 8. Laborers and helpers, and 9. Service workers.

The pay data section of the report will include the number of employees by race, ethnicity, and sex broken down by the same pay bands used in the EEOC’s EEO-1 Component 2 report. The employee’s W2 total wages will be used to determine which pay band to include the employee. The hours worked section will require the total number of hours worked for each employee that is included in the employee workforce snapshot during the Reporting Year.

The same challenges and issues that affected the EEOC’s EEO-1 Component 2 report will also impact the SB 973 report such as the pay bands used in the report where dissimilar jobs are aggregated. The use of the W2 total wages is also problematic because different jobs and employees have different commissions, full time and part time status, and different retirement contributions.

SB 973 provides some guidance on the format of the report where it states that the format of the report is similar to the EEO-1 report. It states, “If an employer submits to the department a copy of the employer’s Employer Information Report, otherwise known as an EEO-1 Report, containing the same or substantially similar pay data information required under this section, then the employer is in compliance with this section.”

Employers should take proactive steps to review their current data collection systems and processes to determine if any updates or changes are needed to be in compliance with the new pay data report.

For information on how OutSolve can assist with this reporting requirement please contact us at info@outsolve.com or go to www.outsolve.com.