California has been trying to strengthen California’s equal pay laws.  The California legislature declared that despite significant progress made in California in recent years to strengthen California’s equal pay laws, the gender pay gap persists, resulting in billions of dollars in lost wages for women each year in California.  The legislature further noted that in California, in 2016, women working full time made a median 88 cents to every dollar earned by men, and for women of color, the gap was far worse.  So, after a number of prior failed attempts, on September 30th, California Governor Gavin Newsom signed into law SB 973[1], which, among other things, created pay reporting requirements for employers to provide specified data regarding demographics of the employer’s workforce.

The new law provides that on or before March 31, 2021 and each year thereafter, California employers with 100 or more employees will be required to submit an updated annual Employer Information Report (“EEO-1”) with specified information on each employee’s pay data by gender, race and ethnicity to the Department of Fair Employment and Housing (“DFEH”).  On the EEO-1, the employer must state the number of employees and hours each worked:

  • By race, ethnicity, and sex.
  • In each of the job categories in the federal EEO-1 report.
  • Whose annual earnings fall within each of the pay bands used by the U.S. Bureau of Labor Statistics in the Occupational Employment Statistics Survey.

The effort to address this pay gap was initially addressed at the federal level when in January 2016,  President Obama signed the Lilly Ledbetter Fair Pay Act and the EEOC announced proposed changes to its EEO-1 report, requiring employers to submit employee W-2 earnings and hours worked.  But, in August 2017, the Trump Administration put a halt to the implementation of this new rule.  Various organizations challenged this halting of the disclosures and by order of the Court, the EEOC was required to reinstate collection of the information for the 2017 and 2018 filing years.  Then, the EEOC announced in July 2020 that it hired the National Academies of Sciences, Engineering, and Medicine’s Committee on National Statistics (“CNSTAT”) to do a study of the quality and utility of the pay data to be collected.  That study by CNSTAT has not been released.  But, the EEOC determined in the interim that the burden on employers “far outweigh[s]” the pay data’s “unproven utility” and the EEOC discontinued the pay data collection requirements.

While the EEOC at the federal level stalled, California moved forward and noted that the intent of the Legislature in enacting the bill was for data collection purposes in order to allow for the designated state agencies to collect wage data to more efficiently identify wage patterns and allow for targeted enforcement of equal pay or discrimination laws, when appropriate.  So, please mark your calendars.  And, while the EEO-1 form has not yet been finalized, it is expected by the end of the year and the state is expected to release additional guidance to assist employers with compliance.  And, while there is time, employers should look at their stats themselves, evaluate how to ensure there is no pay discrimination, unconscious bias or historic inequities in pay that would trigger enforcement actions by the state.

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Attorneys admitted to practice in

California, New York, Colorado, Texas, Oregon and Hawaii

Information contained in this Memo is intended for informational and educational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.  While intended as informational and educational, it is considered advertising under applicable laws of some states, and as such, Epps & Coulson, LLP encourages you to call us to discuss these matters as they apply to you or your business.