California

California releases new payroll reporting guidelines: 4 key changes employers should be aware of

California employers with 100 or more employees are likely to be familiar with the 2020 payroll reporting requirements. However, the recent changes under SB 1162 result in some significant changes for 2023. You may have noticed that SB 1162’s requirements for job postings (which we discuss here and here) have garnered the most attention — at least until now. But don’t forget to read the updated Wage Reporting FAQs recently released by the California Civil Rights Department (CRD). What are the top four changes to payroll data reporting that will impact your business in 2023 and beyond?

1. New deadline for wage data reports

In previous years, wage data reports were due by the end of March. However, SB 1162 has amended this deadline so that reports are now due on the second Wednesday of May each year. This year will be the deadline for filing payment date reports 10th of May.

While the CRD (which was formerly the Department for Fair Employment and Housing) has so far only updated its FAQs to reflect the changes made by SB 1162, the Department has indicated that it plans to provide updated report templates and other documents and that the Portal for receiving wage data reports will be launched on February 1st.

2. Medium and medium hourly rates

The most significant record change made by SB 1162 is a new requirement for employers to calculate and report the average and median hourly rate of employees by facility, job category, race/ethnicity, and gender. The updated FAQs contain a detailed explanation of how employers should make these calculations.

It’s important to note that you must calculate each employee’s individual hourly rate before calculating the average and median hourly rate for each group of employees within the same facility, job category, race/ethnicity, and gender. This represents a significant administrative burden for employers, so you should start the planning process now.

3. Higher penalties for non-compliance

Previously, the CRD had the power to file a civil suit against an employer for failing to file payroll data reports, obtaining an injunction ordering it to do so and recovering the costs of filing such a suit. However, SB 1162 adds civil penalties of $100 per employee for failure to submit payroll data reports, increasing to $200 per employee for subsequent violations. The FAQs have been updated to reflect these new civil penalties.

4. “Employee Contractor” Employee Reports

The most significant change to SB 1162 is the requirement that employers with 100 or more employees hired through “work companies” must file a separate payroll data report covering those workers hired in the previous calendar year. This is, of course, in addition to the wage data reports that employers are required to file for their own workers. While employers have been largely left in the dark about this new requirement, the updated FAQs contain some much-needed information about this new requirement.

First, the CRD now refers to the wage data reports that an employer will file about its own employees as “Payroll Reports.” Reports submitted on temporary employment agency workers are reported as “Employee reports from contractors.” Employers reading the CRD FAQ and future additional guidance need to understand the difference between these two terms.

As discussed above, the CRD expects to release new versions of resources on reporting payroll data by February 1st. So keep an eye out for these additional templates and resources, as well as additional guides and explanations.

In the meantime, the updated Frequently Asked Questions provide some initial clarification on the “Employment Contract Employee Report” requirements, including the following:

  • Contract workers located inside and outside of California are counted to determine if an employer has 100 or more contract workers.
  • You should also count part-time contractor employees and those on paid or unpaid leave — including California Family Rights Act leave, maternity leave, disciplinary suspension, or other leave of absence authorized by the employer.
  • Employers only have to submit one employment contract report, even if they have several employment contract partners.
  • As with the payroll reports, the report must group the employment contract employees who have the same job category, pay grade, race/ethnicity, and gender.
  • As with the payroll reports, employers must calculate the average and median hourly rate of the group of employment contract employees.
  • The snapshot period for the employee reports of the employment contractor is a single pay period between October 1st and December 31st of the reporting year. The CRD recommends that the client-employer works with each of his employment contract partners to choose the uniform wage period between 1 October and 31 December of the reporting year.
  • However, the snapshot period is not the period to use for calculating the agency worker’s wages or hours worked.

While these updated FAQs are helpful and answer some of the unanswered questions about employer reporting requirements, many questions remain. For example, SB 1162 defines a “contractor” as someone who provides labor to a client-employer to perform work in the ordinary course of business for the client-employer. The updated FAQs repeat the legal definition but do not provide additional light on how to interpret this term (eg.

Conclusion

We will continue to monitor updates to the CRD on payment data reporting requirements and required report formatting. Be sure to subscribe to the Fisher Phillips Insight system for the most up-to-date information. Our lawyers can assist you in preparing your company’s payroll data reports. Questions may be directed to your Fisher Phillips attorney, the authors of this insight, or any attorney in our Pay Equity Practice Group.

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