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U.S.: California enacts new pay reporting and family leave requirements

Health and Benefits|Inclusion and Diversity|Total Rewards|Integrated Wellbeing
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By Lindsay Wiggins , Laura Rickey and Ben Lupin | November 23, 2020

The new requirements, taking effect in 2021, aim to reduce pay gaps based on gender, race and ethnicity and expand available family leave.

Employer Action Code: Act

In 2016, the federal Equal Employment Opportunity Commission (EEOC) announced a measure to require employers to disclose aggregate employee pay data by race, gender and ethnicity under the existing EEO-1 form (EEO-1 Component 2) beginning in 2018; however, in 2017, the Trump administration suspended implementation of the measure, pending the outcome of various legal challenges and further study of the issues by the EEOC. Rather than wait for the matter to be resolved at the federal level, California has enacted its own legislation (S.B. 973) to require covered employers to collect and report pay and hours worked data that is nearly identical to the information that would have been reported under the federal EEO-1 Component 2 form.

Separate legislation (S.B. 1383), effective January 1, 2021, expands the protections of the California Family Rights Act (CFRA) for unpaid family leave to include small businesses (with five or more employees) and expands the definition of family members and protected reasons for claiming leave.

Key details

The first pay reports, covering calendar-year 2020 data, are due to be filed with the California Department of Fair Employment and Housing (DFEH) by March 31, 2021 (and annually thereafter). Employers with multiple establishments in the state will be required to submit a report for each establishment as well as a consolidated report that includes all employees. Certain provisions of the reporting requirements are, however, unclear. The law applies to employers with 100 or more employees, but it is uncertain whether that means 100 or more employees in California or nationwide. It is also unclear, for now, whether the required data must be reported only with respect to California employees. Further analysis of the law and FAQs on its implementation are available in this Willis Towers Watson Insider article: New California law requires employers to collect and report pay data.

Separately, effective January 1, 2021, the California Family Rights Act (CFRA) is expanded by S.B. 1383 to require businesses with as few as five employees to provide 12 weeks of mandatory (unpaid) family leave per year. In addition, the grounds on which CFRA leave may be taken are also expanded to cover leave for certain extended family members, children of domestic partners and certain situations linked to active military service.

Employer implications

Covered employers should start to determine how they will collect the pay and hours worked data needed to complete the California reports. This process will likely require employers to adjust their payroll and timekeeping systems to capture this type of data. Coordinating collection of the required data may be particularly challenging when it is retained in separate systems and/or administered by separate vendors. In addition, to prevent unwelcome scrutiny from California regulators, employers will also want to consider conducting a pay equity analysis to determine if any changes with respect to pay practices need to be undertaken. Employers should also familiarize themselves with the new CFRA requirements to ensure they remain compliant.

Contact

Lindsay Wiggins
Director, Talent and Rewards

Laura Rickey
Senior Director, Talent and Rewards

Senior Regulatory Advisor, Health and Benefits

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