SB 973: Expanding employer obligations to submit annual pay data

Beginning in March, Senate Bill 973 will require private employers to submit annual "pay data reports" to the Department of Fair Employment and Housing. The California law implements a previously announced federal program, rolled back by the Trump administration, that would have expanded federal reporting requirements to include employee pay data by race, gender, and ethnicity.

The law applies to private employers in California that (1) have 100 or more employees and (2) are required to file an annual Employer Information Report (also known as an "EEO-1 Report") under federal law. Employees located inside and outside of California are counted when determining whether an employer has 100 or more employees.

Under the new law, on or before March 31, 2021 (and each March 31 thereafter), covered employers must submit a pay data report that includes the following information:

(1) The number of employees, by race, ethnicity, and sex, in each of 10 specified job categories;

(2) The number of employees, by race, ethnicity, and sex, whose annual earnings (based on their W-2s for the year) fall within each of the pay bands used by the United States Bureau of Labor Statistics in the Occupational Employment Statistics survey. The employer is also required to include the total number of hours worked by each employee counted in each pay band.

An employer with more than one establishment is required to submit a separate report for each establishment and a consolidated report that includes all employees. Employers may include clarifying remarks, if they choose. Employers may also submit their federal EEO-1 Reports containing the same or substantially similar data, instead of preparing a new report for the DFEH.

SB-973's stated purpose is to combat discriminatory wage practices. To that end, the new law authorizes the DFEH to investigate and prosecute complaints alleging pay disparities that violate California's equal pay law, (Labor Code section 1197.5). Opponents of the law point out, however, that the data will be prone to false positives because the collected data provides an oversimplified view. Individuals within the broad groups may not perform substantially similar work and W-2 data can easily reflect differences that are not discriminatory.

The law treats the pay data reports as confidential in most circumstances. The law prohibits the DFEH from disclosing "individually identifiable information," except as necessary for purposes of an enforcement proceeding. The law defines "individually identifiable information" as "data submitted pursuant to this section that is associated with a specific person or business." This means that a third party cannot obtain pay data for a specific individual or a specific company through a Public Records Act request. However, the legislative findings in support of SB 973 indicate that the pay data reports could be disclosed through normal discovery in a civil action.