California employers with at least 100 employees are likely familiar with the pay data reporting requirements that were enacted in 2020. However, recent amendments under SB 1162 make some significant changes for 2023. You may have noticed that SB 1162’s job posting requirements (which I discuss here and here) have gotten the most attention, at least so far. But don’t forget to check out the updated Payment Data Reporting FAQ, which was recently issued by the California Department of Civil Rights (CRD). What are the top four payment data reporting changes that will affect your business in 2023 and beyond?
1. New deadline for payment data reports
In previous years, payment data reports were due by the end of March. However, SB 1162 changed this deadline so reports are now filed on the second Wednesday in May each year. This year, the due date for submitting the payment date reports will be May 10.
While the CRD (formerly the Department of Fair Employment and Housing) has only updated its FAQs so far to reflect the changes made by SB 1162, the department has indicated that it plans to provide updated reporting templates and other documents, and that the portal to receive payment data reports will open on February 1st.
2. Average and median hourly rates
The most significant data set change made by SB 1162 is a new requirement for employers to calculate and report employees’ mean and median hourly rate by establishment, job category, race/ethnicity, and sex. The updated FAQ provides a detailed explanation of how employers should make these calculations.
It is important to note that you will need to calculate each employee’s individual hourly rate before calculating the average and median hourly rate for each group of employees within the same establishment, job category, race/ethnicity, and gender. This will be a significant administrative burden for employers, so you should start the planning process now.
3. Increased penalties for non-compliance
Previously, the CRD was authorized to take civil action against an employer that failed to file pay data reports, obtain an injunction compelling them to do so, and recover the costs of bringing such action. However, SB 1162 adds civil penalties of $100 per employee for failure to submit pay data reports, which increase to $200 per employee for subsequent violations. The FAQs have been updated to reflect these new civil penalties.
4. Employee reports of “labor contractors”
The most significant change made by SB 1162 is the requirement that employers with 100 or more employees hired through “labor contractors” must file a separate pay data report covering those employees hired in the prior calendar year. Of course, this is in addition to the pay data reporting that employers will need to submit for their own workers. Although employers have been left in the dark about this new requirement, the updated FAQ provides some much-needed information about this new requirement.
As an initial matter, the CRD now refers to wage data reports that an employer will file on its own employees as “payroll employee reports.” Reports filed on employees of labor contractors are called “labor contractor employee reports.” Employers reviewing the CRD FAQs and additional future guidance will need to understand the difference between these two terms.
As discussed above, the CRD expects to provide new versions of the payment data reporting resources by February 1. Therefore, you should be on the lookout for these additional templates and resources and for additional guidance and clarification.
In the meantime, the updated FAQ provides initial clarification of the “labor contractor employee report” requirements, including the following:
- Contractual employees located inside and outside of California are counted in determining whether an employer has 100 or more labor contractor employees.
- You must also count part-time employees of labor contractors and those on paid or unpaid leave, including California Family Rights Act leave, pregnancy leave, disciplinary suspension, or any other state-approved leave. the employer.
- Employers will only need to file one labor contractor report, even if they have multiple labor contractors.
- Like payroll employee reports, the report should group contractual employees who have the same job category, salary band, race/ethnicity, and gender.
- As with the payroll employee reports, employers will need to calculate the mean and median hourly rate for the group of contractual employees.
- The Snapshot Period for labor contractor employee reports will be a single pay period between October 1 and December 31 of the reporting year. The CRD recommends that the client employer work with each of its labor contractors to select the single pay period between October 1 and December 31 of the reporting year.
- However, the Snapshot Period is not the period that will be used to calculate the labor contractor employee’s wages or hours worked.
While these updated FAQs are helpful and answer some of the outstanding questions about “labor contractor” employee reporting requirements, many questions remain. For example, SB 1162 defines a “labor contractor” as someone who provides a client employer with workers to perform labor within the client employer’s “ordinary course of business.” The updated FAQs repeat the legal definition but do not shed additional light on how this term should be interpreted (for example, according to AB 5 and the “ABC test” to determine employee/independent contractor status).
We will continue to monitor updates to the CRD on payment data reporting requirements and the required reporting format. Make sure you are subscribed to the Fisher Phillips Insight system for the most up-to-date information. Our lawyers can help you prepare your company’s payment data reports. Any questions may be directed to your Fisher Phillips attorney, the authors of this Information, or any attorney in our Pay Equity Practice Group.