Legal Alert: DFEH Offers Further Guidance on SB 973 Reporting

In February of 2021, nearly five months after the September 2020 passage of California’s new pay data reporting law, SB 973, the Department of Fair Employment and Housing (DFEH) has issued additional detailed guidance to help covered employers that are scrambling to submit the required pay data report to the DFEH by the March 31, 2021 deadline. This new guidance is in addition to the several rounds of FAQs, sample reporting template, and 70-page User Guide that were also published by the DFEH to clarify how to comply with this new reporting obligation. The following alert describes the DFEH’s newly released guidance to ensure clients are equipped with information they need to comply with this new law.

As a brief overview, SB 973 applies to employers who (1) (a) regularly employed 100 or more employees during the reporting year (2020), or (b) employed 100 or more employees during the “snapshot period,” and (2) are required to file federal EEO-1 reports. The “snapshot period” is the single pay period chosen by the employer between October 1 and December 31 of each reporting year to determine which employees it must report on in the aggregate.

The DFEH Excel Template for Reporting

In February, the DFEH published an excel template that provides a model for employers to follow in preparing their pay data report. This excel template includes tabs, indicating what information is required in Sections 1 and 2 of the report, depending on whether the employer is reporting as a single-establishment employer or a multi-establishment employer. Multi-establishment employers must report all of their establishment-level data in a single report.

Studios and production companies will need to determine whether they will submit reports for their employing entities collectively, as a single employer, or whether they will submit separate employer reports at a lower level (i.e., at the division or production company level). Studios and production companies should consult with their legal advisors because whether they file a single data report or multiple employer data reports may have legal consequences in other areas.

Section 1: Background Information on The Employer

Section 1 of the report requires a covered employer to fill in at least 26 mandatory rows, each of which requests information on the employer’s background. This information includes, among other things, the employer’s contact information, headquarter address, chosen “snapshot period,” California SEIN and federal EIN. Section 1 also requires the employer to indicate whether it is owned or affiliated with another company, or if there is centralized, integrated or similar ownership, control, management or compensation (such as the same management personnel or central control of personnel policies, stock plans and/or labor relations) between a group of separate entities.

Section 2: Complex Data Sets Based on Combinations of Job Category, Pay Band, and Race/Ethnicity/Gender

The DFEH’s excel template also includes tabs indicating what information is required in the more detailed Section 2 of the report. Section 2 of each report will “contain detailed rows for each combination of Establishment, Job Category, Race/Ethnicity/Sex, and Pay Band information.” Each combination will include information on an aggregate group of employees who fall within each combination of job category, pay band, and race/ethnicity/sex during the employer’s chosen “snapshot period.” The employees who must be included are those who are assigned to California establishments and/or are working in California. As the 70-page User Guide also makes clear, a single row per combination must be provided, using as many rows as it takes to provide a complete report. There are 2,520 possible combinations of row level report data (3 gender categories x 7 race/ethnicity categories x 10 job categories x 12 pay bands) as further explained below, even for a single establishment filer.

In total, there are ten (10) job categories that employees may fall into; 12 pay bands that may apply, ranging from $19,239, and under, to $208,000, and over; and 21 different race/ethnicity/gender codes. Examples of these codes are D30 for Non-Hispanic/Non-Latino – Non-Binary – Native Hawaiian or Other Pacific Islander, and C10 for Non-Hispanic/Non-Latino – Female – White. Important to note: Non-binary is now one of three gender categories that employers must report on. This means that employers must now collect data on whether employees identify as non-binary.

In addition to categorizing employees based on combinations of job category, pay band, and race/ethnicity/gender, employers will also need to provide information in at least an additional 13 columns in Section 2. These additional columns request information on establishment name and address, as well as establishment NAICS (industry code), major work activity, number of employees falling within each combination, and total hours worked. Once an employer has combined this aggregated data, it should review its report to identify any potential wage gaps or issues based on race, gender, or ethnicity. Should any such gaps exist, employers should be prepared to justify them to the DFEH in response to any inquiries.

Requesting A 30-Day Extension Until April 30, 2021 To Report

Because the reporting obligation imposed by SB 973 is laborious and complicated, and because the deadline also is rapidly approaching, the DFEH has offered the potential for relief in the form of a possible enforcement deferral period. Covered employers may request deferral of an order for compliance by submitting a request to the DFEH by March 31, 2021, using a required form, which can be found here. If the DFEH approves the request, the employer will have until April 30, 2021 to file its report with the DFEH.

EP’s Solution for Assistance with SB 973 Reporting

To assist clients, EP has introduced a Diversity Management solution to equip studios and production companies with the information and tools they will need to support SB 973 compliance. For more information, contact our team via the contact form on our website. Studios and production companies should also consult their labor counsel regarding their compliance obligation with SB 973.

For additional information, see our October 2020 Legal Alert, SB 973 Overview, and SB 973 FAQ’s.