California Employers: California increased your record keeping responsibilities by requiring annual pay reports and will impose heavy fines for your failure to keep up! (Part I)
race, Ethnicity, sex, and payscale…
Just a few of the things employers must now keep track of.
On September 27, 2022, California Governor Newsom signed bill SB 1162 into law. This new law requires employers to compile annual pay reports based on race, ethnicity, and sex and to make public the salary ranges of all their employees.
Currently, federal law requires private employers that have 100 or more employees to file an annual Employer Information Report (EEO-1) and a pay data report that includes the number of employees by race, ethnicity, and sex in specified job categories. The EEO-1 form must be filed on or before March 31 every year. However, an employer who submits an EEO-1 form that contains the same or substantially similar pay data information is deemed to have complied with the pay data report requirement. Employers currently do not have to file a separate pay data report.
The new law requires private employers to file both an annual EEO-1 form and a pay data report. The EEO-1 form will still need to be filed on or before March 31 every year, and the pay data report will need to be filed on or before the second Wednesday of May every year (beginning in May 2023).
In addition, there are several instances where separate pay data reports are required. For example, private employers that have 100 or more employees hired through labor contractors are also required to submit a separate pay data report for those employees. Separate pay data reports are also required for employers with multiple establishments; each establishment will require its own pay data report.
What information will need to be included in the pay data report? The bill states that employers will need to include the median and mean hourly rate for each combination of race, ethnicity, and sex within each of the following ten job categories:
executive or senior level officials/managers,
first or mid-level officials and managers,
professionals,
technicians,
sales workers,
administrative support workers,
craft workers,
operatives,
laborers and helpers,
and service workers.
Additionally, the pay data report will need to include the total number of hours worked by each employee. Clearly, the pay data report is meant to be an all-inclusive detailed break-down of your workforce.
The new law requires employers to get moving because their human resources department will need to provide the first report by May of next year (2023) and the fines for failing to file a pay data report are quite hefty. If an employer fails to file the pay data report, the employer could be fined as much as $100 per employee and $200 for any subsequent failure to file. That means if an employer (who has at least 100 employees) fails to file a pay data report, he could be fined as much as $10,000 for the first violation and $20,000 for each subsequent violation.