It's a new year, and there are some new labor laws taking effect in the Golden State. One of the big ones? The California pay data reporting law.
This new law requires some businesses to report what they're paying their team members. But, it also includes requirements for smaller companies too. No matter your size, we'll cover these requirements and how to file a report with the state if you need to do so.
Let's dive in.
What is the California Pay Data Reporting Law and Who Does it Apply to?
Effective January 1, 2023, California's pay data reporting law requires employers with 100 or more employees to report their pay data to the California Civil Rights Department (CRD)—formally the California Department of Fair Employment and Housing (DFEH)—by the second Wednesday of May every year.
For 2023, this information is due May 10.
What types of data are they looking for, exactly? Essentially the gender, race, and ethnicity of your employees, as well as information about their job titles, pay levels, and other relevant details.
The ultimate goal of this law is to encourage public and private employers to address pay disparities among different groups of employees. Pay gaps can affect the morale of your team–so it can help your business to fix these issues too.
Requirements for Small Businesses in California
The law doesn't leave out small businesses, either. While you don't need to create an entire report, there are some things you'll need to do to comply with the new law. They include:
Post Pay Scale Info in Job Listings
California employers with 15 or more employees have to post pay scale data in all open job postings.
Provide Pay Scales to Candidates and Employees when Requested
All employers–no matter their size–have to tell a job candidate or an employee a position's pay scale. This only applies to positions an employee works in or the candidate is applying to.
All employers have to keep records of job title and wage rate history for every employee–during their employment–and for three years after they leave.
Penalties if You Don't Participate—and Are Supposed To
If an employer doesn't comply with posting pay scale information in job listings, they may have to pay $100 to $10,000 per violation. The good news? You get a chance to update your job postings–before you're fined.
If you're a larger employer and don't send in your pay data report at all, you could face civil penalties of up to $100 per employee and up to $200 per employee if you continue to not file.
A Bit of Background
You may have heard of the different bills passed in the California legislature to codify this law–like Senate Bill 973, passed in 2020, that required companies with 100 or more employees to report pay data but didn't include contractors. Or Senate Bill 1162, which passed in October 2022 and changed the law to include workers hired through contractors and some other important facts you see above. That's the law that's in place now.
Which Employees Do I Need to Give Pay Data Info On?
So does this law apply to every single person that works for you? It's broader than you might think. You'll need to count the following types of employees toward your total number of team members and report their pay data:
- Full-time employees
- Part-time employees
- Contractors if you have 100 or more supplied through a third party (i.e., like a staffing agency) during the calendar year, which is also conveniently referred to as the reporting year. By the way, you'll have to include them in a separate report called "Labor Contractor Employee Report."
- Employees outside of California: They're counted too! But if you have employees working in different states and they are reporting solely to a non-California-based franchise or business, then you do not need to include their information in your report. However, they'll still be counted toward your totals.
Pay Data Reporting Requirements for Businesses
To comply with this law, you'll need to pull pay data from what's called a snapshot period, which is a single pay period of your choosing between October 1 and December 31.
Here's what you'll need to include:
The number of employees in each job category: Broken down by race, ethnicity, and gender. Here are the different job categories you can use:
- Executive or senior-level officials and managers
- First or mid-level officials and managers
- Sales workers
- Administrative support workers
- Craft workers
- Laborers and helpers
- Service workers
The total number of hours worked by employees in each job category: Broken down by race, ethnicity, and gender.
The total number of promotions, demotions, and changes in each job category: Broken down by race, ethnicity, and gender.
The total amount of wages, the mean and median rates for those wages, and other forms of compensation (like bonuses and paid time off) for each job category: Broken down by race, ethnicity, and gender.
The total number of employees in each pay band: Broken down by race, ethnicity, and gender. A pay band is a group of jobs with similar pay rates. Here's an example of pay bands for a hypothetical company:
- Pay Band 1: Entry-level positions (e.g., administrative assistant, customer service representative)
- Pay Band 2: Mid-level positions (e.g., supervisor, project manager)
- Pay Band 3: Senior-level positions (e.g., director, vice president)
The total number of hours worked by employees in each pay band: Broken down by race, ethnicity, and gender.
The total amount of wages and other forms of compensation in each pay band: Broken down by race, ethnicity, and gender.
Reporting from each establishment (like a parent company and franchises), though you can definitely submit all the info in one big excel document.
The pay scale (if requested) for the position an employee is currently working in.
Employer information, including their NAICS code (the one you put on your tax return).
This info must be sent to the state even if you aren't required to file EEO-1 reports to the Equal Employment Opportunity Commission (EEOC).
Where Do I Submit My Business's Pay Data?
Is There a Template I Can Use?
Worried you need some help with the filing requirements? You can get a template for an excel or CSV file from the state and just enter the required information into the right fields. They also include handy user guides.
What Happens if My Business Has Pay Disparities?
If the state finds that your business isn't giving equal pay to members of different groups–for example, you have a female employee in the same position as a male employee and are paying her less–they may do an investigation into your pay practices.
If they find evidence of discrimination, they could take legal action against you, like seeking monetary damages and other forms of relief for affected employees.
On a more positive note, they could give you some technical help to address these disparities, like offering you some guidance on how to analyze pay equity and strategies to fix the issue.
Frequently Asked Questions
Any law comes with questions–and this one is no exception. Here are the top FAQs on the pay transparency law and their answers:
How long do I have to keep an employee's pay data?
During each employee's tenure and three years after the end of their employment.
Will the California government make this data public?
No–if the government chooses to use the data, it will remove any identifying information.
How long does the state of California keep the data?
Get Ready for the May Deadline
The reporting deadline is coming up on May 10, which means things will go a lot smoother come spring if you start gathering this info now. While it can seem daunting to adjust to a new way of compiling data, this approach can ultimately benefit your employees and business as a whole.
If this all seems too overwhelming, it's a great time to reach out to a payroll specialist for help!