The California Department of Fair Employment and Housing (“DFEH”) issued another round of guidance under California’s new pay data reporting law (“SB 973”). This time, subtopic #3 Required Content (see backstory below) provided guidance clarifying what the Department expects employers to report under the new law. This includes information addressing employees both inside and outside of California (albeit a matrixed and still ambiguous requirement).

Backstory

On November 2, 2020, DFEH originally issued guidance as to the purpose and filing requirements under California’s SB 973. Those 13 FAQ’s fill subtopic #1 Introduction and subtopic #2 Filing Requirements.

See our previous WIR and companion blog.

Legal Note

DFEH intends for this sub-regulatory FAQ advice to be binding on employers. However, FAQs shouted out an open window or thrown up on a state website lack the binding force and effect of law. DFEH does NOT plan a Rulemaking with a proposed Rule and does NOT plan a public comment period, or the publication of a Final Rule. Rather, DFEH simply hopes that no employers will legally challenge it pursuant to California’s Administrative Procedure Act by refusing to file its pay data. The California APA bans such a casual approach to regulatory matters of significance accomplished merely through executive fiat without input from the public and lacking the benefit of a formal Rulemaking process.

This issue of Notice and Comment Rulemaking has been a running gun battle with California state labor agencies for decades. Periodic court rulings have struck down executive fiat “podium policies.” Occasional wide-scale administrative agency purges occur of rogue writings, including of entire manuals and hundreds of written directives by various names which crop up like weeds in an untended garden. DFEH has returned to the era of just opening a window and to willy-nilly let it fly!

The DFEH is also feeding out its sub-regulatory guidance on SB 973 like a short order cook–as it comes off the griddle—and not like dinner—all at once. DFEH intends more sub-regulatory guidance FAQs at unknown dates in the future just to keep you coming back for more. Still to come are #4 Pay, #5 Hours Worked, #6 Multi-Establishment Employers, #7 Acquisitions & Mergers, and #8 Spinoffs.

Here is a catalogue of the new DFEH sub-regulatory guidance:

  • First, the DFEH provided definitions for several key terms crucial to the California pay data reporting obligation. Specifically, DFEH defined the “reporting year” to refer to the calendar year prior to the March 31st, 2021 submission deadline.
  • Second, DFEH defined the obligation for employers to select “a single pay period” to occur anytime between October 1st and December 31st of the “reporting year.” So, for this first year of reporting, for example, DFEH is asking employers to pick a pay period of its choosing between Oct 1, 2020 and December 31, 2020.
  • Third, the DFEH clarified which “private employers” are subject to SB 973. [This third discussion will tell you how to count to determine if you have 100 employees, triggering the obligation to file a report. We will discuss below WHICH EMPLOYEES have to go into a report].
      • Employers which “regularly” employ 100 employees or more must submit the pay data report unless the employer had no employees in California at any time during the “reporting year”; [Editor’s Note: So, to determine whether a company has to file a pay data report, you will count the employees of the company working both inside and outside of California unless you have NO employees in California at all. Note: I have not yet said a company has to file pay data for employees outside of California. Be patient. Coming.]
      • “Regularly employed 100 or more employees during the Reporting Year” means employed 100 or more individuals on a regular basis during the Reporting Year. “Regular basis” refers to the nature of a business that is recurring, rather than constant. * * * “For example, in an industry that typically has a three-month season during a calendar year, an employer that employed 100 or more employees during that season regularly employed the requisite number of employees and would be required to file a pay data report to DFEH, if the employer is also required to file an EEO-1 Report.” (The employer may not have to report these employees, however and for example, if it employed them OUTSIDE of the snapshot period the employer has chosen to report).Editor’s Note: Not all employers have to file EEO-1 reports, so large numbers of employers just escaped California reporting: i.e. Universities (which file IPEDS reports and not EEO-1 reports) and state and local governments (which file EEO-4 Reports); and staffing companies which are not “employers” for purposes of reporting EEO-1 Reports.
      • When determining this 100-employee jurisdictional threshold, DFEH adopted a California Code definition of the term “employee”:
        • “an individual on an employer’s payroll, including a part-time individual, whom the employer is required to include in an EEO-1 Report and for whom the employer is required to withhold federal social security taxes from that individual’s wages.”
          • Note: That definition typically would EXCLUDE from reporting staffing company employees payrolled through the staffing company.
        • DFEH also believes employers with at least one employee working in California must count toward the 100 or more-employee reporting threshold “[e]mployees on paid or unpaid leave, including California Family Rights Act (CFRA) leave, pregnancy leave, disciplinary suspension, or any other employer-approved leave of absence… .”
        • Finally, DFEH also believes the employer must count towards its 100-employee jurisdictional threshold, company “employees” who work both inside and outside of the state of California during the “snapshot period” the employer has chosen. So, DFEH believes that employees working outside the state of California count toward DFEH’s jurisdictional threshold of 100 or more employees AND IF the employer has at least one employer working in the state of California. THAT DOES NOT MEAN, THOUGH, that the employer necessarily must report on employees working outside of California. Read on.
  • Fourth, there are two different types of pay data reports an employer may need to submit: “single-establishment” and “consolidated.” [DFEH has not defined the term “establishment,” except perhaps in the negative to exclude from the definition a remote employee working from home.]
    • If an employer has a single establishment in California, DFEH believes that the employer need submit only a single “establishment report” [which is one pay data report covering all employees, including all remote workers, all of whom DFEH is assuming would necessarily have to be “assigned” to that lone California establishment]. However, those employers with multiple establishments in California will need to submit not just an “establishment report” for each single establishment, but also a “consolidated report.”
  • Fifth, DFEH also repeated SB 973’s description of the information it will require of employers in the called-for pay data report:
    • The number of employees by race, ethnicity, and sex in each of ten job categories, and the number of employees by race, ethnicity, and sex 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. [See our prior blog discussing this reporting matrix].
  • Sixth, THE NEW GUIDANCE RE EXTRA-TERRITORIAL REACH OUTSIDE OF CALIFORNIA AND RE REMOTE WORKERS:

    Background:
    (A) DFEH believes that employers must report pay data ONLY for “employees assigned to California establishments and/or working within California.”
    (B) While that sounds limited, DFEH then goes on to expansively include in the called for reports certain remote workers working outside of California but who are “assigned” [not defined] to California establishments.

    (C) DFEH’s FAQs pose three situations which could occur as to employees working outside of California:

      • Single-Establishment Employer Located Within California, But With Remote Employees Outside of California: This employer would include on its pay data report “all employees (including any employees outside of California) whether or not teleworking” (not defined). This situation addresses the company which exists at only one office location and where that location is in California. DFEH apparently reasons that all of that company’s employees working outside of California must be “assigned” to the California headquarters (since where else?).
      • Multiple-Establishment Employer With Establishments Only In California: This employer would “include across its establishment reports and in its consolidated report all employees (including any employees outside of California) whether or not teleworking” [not defined].Editor’s Note: DFEH apparently assumes that since all of the company’s “establishments” are in California, remote employees working out of state must be “assigned” to one or more of the California brick and mortar offices.
        • But, what if one remote employee working outside of California (in her home in Nevada, let’s say) reports to another remote employee working outside of California (in her home in Arizona, let’s say). In such a case, that company might reasonably define both of the remote (Nevada and Arizona) locations to be “establishments” (especially since DFEH has also not defined the term establishment).
      • Multiple-Establishment Employers With Establishments Inside And Outside Of California: DFEH believes this employer “must [emphasis in original] report to DFEH on its California establishments, all of its employees assigned [not defined] to those establishments (including any employees outside of California) whether or not teleworking [not defined], and any other California employee [not defined] (including those teleworking [not defined] from California but assigned [not defined] to an establishment [not defined] outside of California).” (yellow highlighting added).

        Editor’s Note
        : DFEH apparently intends the yellow highlighted language, immediately above, to require pay data reporting of an employee who performs work within the physical boundaries of the state of California, even if that employee reports to someone outside the state of California.

(D) DFEH also notes that employers “may report to DFEH on its establishments and employees” the employer is NOT required to report. (But who is going to do that?)

  • Seventh, once an employer has determined which employees it must report (i.e. the “relevant” employees), here is what DFEH wants you to report:
    1. The total number of hours worked by each relevant employee;
    2. The “reporting year,” the dates of the “snapshot period” the employer selected, the report type, and the total number of reports the employer is submitting;
    3. The employer’s name, address, headquarters’ address (if different), Employer Identification Number, North American Industry Classification System code, Duns and Bradstreet number, the number of employees inside and outside of California, the number of establishments inside and outside of California, and whether the employer is a California state contractor;
    4. For a multi-establishment employer’s “establishment reports,” the establishment’s name, address, number of employees, and major activity;
    5. For a multi-establishment employer’s “consolidated report,” the names and addresses of the establishments covered by the “consolidated report”:
    6. Any clarifying remarks the employer wishes to include;
    7. A certification that the information submitted is accurate and prepared in accordance with instructions, including the name, title, signature, and date of signature of the certifying official; and
    8. The name, title, address, phone number, and email address of the employer’s representative the DFEH can contact about the pay data reports the employer submits.

THIS COLUMN IS MEANT TO ASSIST IN A GENERAL UNDERSTANDING OF THE CURRENT LAW AND PRACTICE RELATING TO OFCCP. IT IS NOT TO BE REGARDED AS LEGAL ADVICE. COMPANIES OR INDIVIDUALS WITH PARTICULAR QUESTIONS SHOULD SEEK ADVICE OF COUNSEL.

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John C. Fox
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