On September 30, 2020, the California Legislature enacted Senate Bill SB-973. The bill requires private employers in California (with over 99 employees nation-wide) to file a report with California’s Department of Fair Employment and Housing (DFEH) by March 31, 2021. The report requires detailed information on the number of employees, and their aggregate hours worked, by twelve pay bands for each of ten job-groups. The California pay requirement under Senate Bill 973 is very similar to the EEO-1 Component 2 data that was collected at the national level for the year 2017/2018 by the Equal Employment Opportunity Commission (EEOC). However, there are some differences. Two that stand out are the use of a different definition of pay and a different definition of the hours worked.
- Unlike the Federal EEO-1 Component 2 collection from 2017 and 2018, in which the EEOC required employers to use W-2 Box 1, DFEH is requiring W-2 Box 5.
- Unlike the Federal EEO-1 Component 2 collection from 2017 and 2018, in which the EEOC required employers to exclude time on paid leave when calculating hours worked, DFEH is requiring employers to include time during which the employee was on any form of paid time off for which the employee was paid by the employer, because such pay will be included on the employee’s W-2.
What Should You Do?
Your Only Legal Requirement Is To File Your Data. But you could get blindsided with regulatory or legal actions if you don’t check for statistically significant pay inequity in your data.
First Collect Your Data: This is part of the legal requirements.
With the filing deadline approaching you should collect your data and complete the same forms you used for you EEO-1 Component 2. If you have completed the EEO-1 Component 2 form in the past you will still need to update for the calendar year 2020 for a snapshot of the employees that existed in a given pay period between October 1, 2020 and December 31, 2020. The form of the electronic file you will need to use has not yet been provided by the DFEH, but they have said that the EEOC data format will be followed. So for now, you should structure your data in the same format used for you EEOC-1 Component 2 filing. You can find the link to the EEOC form here.
If you need help constructing the data for this filing or filling in the form you can contact us at info@EquiCalc.com or (415) 699-8180.
- Collect the yearly wage data W-2 Box 5 for a set of employees that worked during a given pay period between October 1, 2020 and December 31, 2020.
- The specific pay period is your choice.
- Make sure to include paid time off in the wages.
- Determine which of your jobs fit into each of the ten Occupation Categories listed by the EEOC.
- Your data should follow the format required by the EEOC Component 2 filing. Find that form here.
- The specific template required by the DFEH is still not available on their website as of January 13, 2021. However, DFEH has indicated that its template would follow the EEOC Component 2 allowed formats.
Second: Test Your Data for Appearance of Discrimination. This is not a legal requirement, but it will help you manage potential risks and enhance pay equity.
You are about to file your wage and demographic data with an agency that has the authority to investigate your firm for wage discrimination. You might want to check whether that data you are about to submit indicates pay inequity. The EEOC suggested a set of statistical tests used to test for pay discrimination based on the same form of the data the DFEH is requiring. These tests appear complicated at first, but they are very fast to run, minutes or hours at most, with the right software. See EquityTest for fast access to tests suggested by the EEOC for this type of pay data.
- Perform statistical tests to determine if there are any findings you should investigate.
- If there are issues identified by the statistical tests, investigate whether your data is correct.
- It is always good to check for data errors. Sometimes statistically significant findings occur because of errors in the data collection and compilation.
- Check whether all individuals are classified in the right 10 EEOC job categories.
- If may not be perfectly clear which of your jobs fall into each of the 10 EEOC specified Job Categories. Make appropriate adjustments.
- Retest your data after any corrections and adjustments.
- Understand any remaining statistically significant differences.
- Your DFEH data may show an indication of statistically significant differences in compensation by demographic groups
- There may be perfectly valid explanations for these remaining differences.
Third: Prepare a File with Any Explanations for Statistically Significant. This is not a legal requirement, but once you understand your DFEH pay data it may be valuable to document why it appears as it does.
Having an explanation prepared prior to a potential investigation will allow an employer to quickly address or rebut any concerns a regulatory agency may have.
- Simply keep the form you filed, your statistical tests and any explanations for why you believe the data and test appear as they do.
- For example, it may be that you have pay differences between demographic groups because your firm pays for tenure with the company and in some job categories certain demographic groups have very long tenure.
- There may be many other explanations that would not require any pay adjustment. Or perhaps you have made pay adjustments since the snapshot period that would eliminate observed pay inequity across demographic groups.
Fourth: File your data with the DFEH.
The DFEH has not yet opened the portal to file. You can find updates here