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The California Civil Rights Department (CRD) recently issued new guidance confirming that private colleges and universities and labor contractors are subject to the newly expanded pay data reporting obligations added as part of the state’s pay transparency law, Senate Bill (SB) 1162, enacted in September 2022. The state has set up an online portal to submit 2022 pay data reports, which are due on May 10, 2023.

SB 1162, which requires employers to disclose pay ranges in job postings, also requires California private employers to annually report pay, demographic, and other workforce data to the CRD on both employees and workers supplied by contractors. Specifically, SB 1162 requires private employers with one hundred or more employees and/or one hundred or more workers hired through labor contractors to annually file a “Payroll Employee Report” and, if applicable, a separate “Labor Contractor Employee Report.”

However, the new reporting obligations had raised questions about whether employers that do not have to file federal Employer Information Reports (EEO-1), including private colleges and universities, would still be subject to the new California reporting obligations and to what extent labor contractors and their client employers would be required to cooperate to meet employers’ reporting obligations. In January 2023, the CRD released a new set of Frequently Asked Questions (FAQs) providing further guidance for employers on filing pay data reports.

Colleges and Universities

SB 1162 removed a limitation that employers were only subject to the pay data reporting if they were also required to file a federal EEO-1 report or other federal pay data reports, including Integrated Postsecondary Education Data System (IPEDS) data reports in the case of private colleges and universities. As a result, covered employees are required to file applicable pay data reports regardless of federal reporting obligations.

The CRD confirmed in the FAQs that these requirements do apply to private colleges and universities. Thus, new for 2023, private colleges and universities must file Payroll Employee Reports if they have one hundred or more employees and at least one employee in California, and “separately” file Labor Contractor Employee Reports if they have one hundred or more workers supplied by labor contractors. However, the CRD noted that public colleges and universities remain “exempt” from the pay data reporting requirements as they are not “private employers” within the meaning of the new law.

EEO-1 Reports

The FAQs further notify employers that private employers, in general, are not relieved of the new California reporting obligations because they were not required to file an EEO-1 report pursuant to federal law. The new obligations in California require employers that meet the threshold number of employees or contractors must file applicable state pay data reports. The CRD stated that employers may not use federal EEO-1 reports or IPEDS reports to satisfy the California reporting obligations. The FAQs also state that private employers that file EEO-3, EEO-4, or EEO-5 reports are required to file pay data reports for payroll employees and labor contractor employees if they meet the filing threshold. While many of these employers may not be “private employers” subject to the law, this change could mean that additional entities are required to file California pay data reports provided they are both private employers and meet the filing threshold requirements.

Labor Contractors

Additionally, SB 1162 made several changes to reporting obligations regarding employers with workers supplied by a labor contractor or subcontractor. In general, the law requires that labor contractors “supply all necessary data” to clients obligated to file a Labor Contractor Employee Report and permits any penalty to the client employer for failure to meeting its reporting obligations be assessed to the labor contractor. This requirement, in particular, has created uncertainty for employers that rely on labor contractors.

The CRD “encourage[d]” client employers and labor contractors to communicate to meet these obligations, recognizing that client employers are generally in the best position to know whether they are subject to the contractor employee reporting obligations. However, the CRD stated in the FAQs that a labor contractor that supplies more than one hundred workers to a client employer “knows or reasonably should know of the client employer’s filing obligation.” In such cases, the labor contractor is required to “supply necessary data to the client employer whether or not the client employer requests that they do so.”

In situations where a contractor uses a subcontractor to supply employees to a client employer, the CRD stated that labor contractors themselves are not considered client employers that are required to file separate reports. The client employer of the “prime contractor” is considered as the client employer for reporting purposes.

As such, both the “prime contractor and the subcontractor each have an independent legal obligation to provide the client employer data needed to complete” its pay data reports. In addition, CRD stated that the prime contractor and subcontractor should “not combine” their data as they are considered separate contractors for reporting purposes.

Key Takeaways

SB 1162 expands the pay data reporting obligations for California employers. The law further requires that additional employers—such as private colleges and universities—that were not necessarily required to report to the state or that used federal reports to satisfy state reporting requirements must now file state-specific pay data reports regarding employees and contractors. These requirements are new for the 2022 reporting year and reports are due on May 10, 2023. Employers may want to review whether they are now subject to the California reporting obligations or how the new law has changed their reporting obligations.

Our previous article, “California’s New Pay Transparency Law: Pay Data Reporting Obligation Changes for 2023,” includes more information on the pay data reporting obligations in SB 1162.

Ogletree Deakins will continue to monitor and report on developments with respect to California pay data transparency legislation and will post updates on the firm’s California, Higher Education, and Pay Equity blogs. Important information for employers is also available via the firm’s webinar and podcast programs.

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