• California Employers: Prepare for Greater Pay Transparency and Pay Data Reporting Requirements

    By Anthony Risucci

    On September 27, 2022, Governor Newsom signed Senate Bill (“SB”) 1162 into law. The law alters and expands pay reporting obligations to California’s Civil Rights Department (“CRD”)1 for private employers with 100 or more employees. The law also increases pay transparency obligations under Labor Code Section 432.3, including changes that apply to both public and private employers of all sizes.

    As explained in more detail below, SB 1162 requires employers to do the following:

    • Private employers with more than 100 employees must submit detailed “pay data reports” to the CRD by the second Wednesday of May every year. The pay data report submission obligation now exists independently of similar federal reporting obligations to the Equal Employment Opportunity Commission.
    • All employers must provide pay scale information to employees and job applicants for their position upon request.
    • All employers with more than 15 employees must publish pay scale information on every job posting for the position being filled.
    • All employers must maintain pay history information for every employee for the duration of their employment, and for three (3) years beyond the date their employment ends.

    Pay Data Reporting Requirements

    A. Pay Data Reporting Requirements Before SB 1162
    Prior to the enactment of SB 1162, private employers with 100 or more employees were required to file a “pay data report” to the CRD. Pay data reports are required to contain employee pay data for specific job categories broken down by race, ethnicity, and sex.  

    California law allowed for this requirement to be met by filing an Employer Information Report (“EEO-1”) (a form specifically prepared for the Equal Employment Opportunity Commission for similar federal reporting requirements) on or before March 31 each year, so long as the EEO-1 report included substantially similar pay data information. California law also required employers with multiple establishments to submit a report for each establishment and a consolidated report that included all employees. The first such reports were due in 2021.  

    B. New Pay Data Reporting Requirements
    SB 1162 simultaneously streamlines and complicates pay data reporting requirements by amending Government Code Section 12999. That statute now requires private employers with more than 100 employees to submit a pay data report to the CRD. An EEO-1 form is no longer sufficient. (See Gov. Code § 12999, subd. (a)(1).) Private employers with 100 or more employees hired through labor contractors within the prior calendar year are also now covered by the reporting requirements (collectively referred to as “Covered Employers”).2 (Gov. Code § 12999, subd. (a)(2).)   

    Covered Employers must now submit pay data reports containing all of the following information:

    1. The number of employees by race, ethnicity, and sex in each of the following job categories:

    • Executive or senior level officials and managers;
    • First or mid-level officials and managers;
    • Professionals;
    • Technicians;
    • Sales workers;
    • Administrative support workers;
    • Craft workers;
    • Operatives;
    • Laborers and helpers; and 
    • Service workers.

    2. The number of employees by race, ethnicity, and sex whose annual earnings fall within each of the pay bands used by the United States Bureau of Labor Statistics in the Occupational Employment Statistics survey.

    3. The median and hourly wage rate within each job category, for each combination of race, ethnicity, and sex.

    4. A “snapshot” that counts all of the individuals employed in each job category by race, ethnicity, and sex during a single pay period of the employer’s choice between October 1 and December 31 of that reporting year.

    5. A calculation of the total earnings, as shown on Internal Revenue Service form W-2, for each employee in the “snapshot,” for the entire reporting year, regardless of whether or not an employee worked for the full calendar year. The employer must tabulate and report the number of employees whose W-2 earnings during the reporting fell within each pay band.

    6. The total number of hours worked by each employee counted in each pay band during the reporting year.

    7. The employer’s North American Industry Classification (NAICS) code.

    (Gov. Code § 12999, subd. (b).) Pay data reports must also include a section for employers to provide clarifying remarks on the information provided and be made available in a format that allows the CRD to search and sort the information using “readily available software.” (Gov. Code § 12999, subds. (d)-(e).) Covered Employers that hire employees through a labor contractor are also required to disclose the ownership names of all labor contractors used to supply employees. (Gov. Code § 12999, subd. (a)(2).)

    Pay data reports must be submitted on or before the second Wednesday of May 2023 and on or before the second Wednesday of May each year thereafter.3 (Gov. Code § 12999, subd. (a)(1).) Covered Employers with multiple establishments are still required to submit pay data reports for each establishment but are no longer required to submit a consolidated report for all employees in addition to establishment-specific reports.4 (See Gov. Code § 12999, subd. (c).)

    Failure to comply with pay data reporting requirements may subject an employer to one or more of the following: (1) an order requiring compliance (with all costs associated with seeking the order being recoverable by the CRD); (2) a civil penalty not to exceed one hundred dollars ($100) per employee for an initial failure to file a report; and (3) a civil penalty not to exceed two hundred dollars ($200) per employee for continued failure to file a report. (Gov. Code § 12999, subd. (f).)

    C. Confidentiality of Pay Data Reports Submitted by Covered Employers
    Earlier versions of SB 1162 would have required CRD to publish individual employers’ pay data reports on a publicly accessible website. That is not the case with the version of the bill that Governor Newsom signed. The public posting requirement was removed from the bill by the Assembly Appropriations Committee.  

    As was the case prior to SB 1162, CRD is permitted to compile data from pay data reports and publish “aggregate reports” that are available to the public. (Gov. Code § 12999, subd. (i).) Importantly, such reports must be drafted so as to be “reasonably calculated to prevent the association of any data with any individual business or person.” (Ibid.)  

    SB 1162 also makes it “unlawful” for CRD “to make public in any manner . . . any individually identifiable information obtained” from a pay data report unless an investigation or enforcement proceeding is initiated against an employer.5 (Gov. Code  § 12999, subd. (g).) Any individually identifiable information submitted to CRD is also considered “confidential information and not subject to disclosure pursuant to the California Public Records Act.” (Gov. Code Section 12999, subd. (h).)

    Pay Transparency Obligations

    SB 1162 also greatly increases employer obligations under Labor Code Section 432.3. Unlike the pay data reporting requirements of Government Code Section 12999, changes to Labor Code Section 432.3 apply to all public and private employers. 

    Prior to SB 1162, Section 432.3 primarily served to prohibit an employer from seeking salary history information about a job applicant or relying upon such information as a factor in determining what salary to offer that applicant. (Lab. Code § 432.3, subds. (a)-(b).) SB 1162 left those prohibitions in place, but added additional requirements for employers aimed at increasing pay transparency.  

    All employers are now required to provide the pay scale for a position to a job applicant upon their request.6 (Lab. Code § 432.3, subd. (c)(1).) Current employees are also entitled, upon request, to the pay scale for the position they are currently employed in. (Lab. Code § 432.3, subd. (c)(2).)  

    If an employer has 15 or more employees, they are required to include the pay scale for a position on any job posting—a significant change to the prevailing practice of not including salary information on job postings. (Lab. Code § 432.3, subd. (c)(3).) Use of a third party to announce, post, publish, or otherwise make an employer’s job posting known does not eliminate the requirement to include the pay scale in the job posting. (Lab. Code § 432.3, subd. (c)(5).) 

    Employers are required to maintain records of job title and wage rate history for each employee for the duration of their employment, and until 3 years after their employment ends. (Lab. Code § 432.3, subd. (c)(4).) These records are open to inspection by the Labor Commissioner. (Ibid.) Failure to keep such records creates a rebuttable presumption in favor of an employee’s claim that the Labor Code has been violated. (Lab. Code § 432.3, subd. (d)(5).) 

    An employee or job applicant that claims a violation of this statute may file a written complaint with the Labor Commissioner within one year of the alleged violation, or file a civil action that can provide “for injunctive relief or any other relief the court deems appropriate.” (Lab. Code § 432.3, subds. (d) (1)-(2).) The Labor Commissioner may levy fines against violating employers between one hundred dollars ($100) and ten thousand dollars ($10,000) per violation. (Lab. Code § 432.3, subd. (d)(4).) First time violators, however, may avoid civil penalties by demonstrating that all job postings for open positions have been updated to include pay scales. (Ibid.)

    Conclusion

    SB 1162 is part of a growing wave of pay transparency laws, including recently enacted laws in New York City, Colorado, and Washington state. Employers should prepare for pay transparency obligations to continue to arise in various jurisdictions. Attorneys of Coblentz Patch Duffy & Bass LLP’s Labor and Employment practice group are familiar with the new requirements imposed by SB 1162 and can assist employers in complying with these changes in the law.

     

    [1] Formerly known as the Department of Fair Employment and Housing (“DFEH”).
    [2] SB 1162 defines “employee” as “an individual on an employer’s payroll, including a part-time individual, and for whom the employer is required to withhold federal social security taxes from that individual’s wages.” (Gov. Code § 12999, subd. (k)(1).) A “labor contractor” is defined as “an individual or entity that supplies, either with or without a contract, a client employer with workers to perform labor within the client employer’s usual course of business.” (Gov. Code § 12999, subd. (k)(2).) If an employer has both 100 or more employees and 100 or more employees hired through a labor contractor, the legislation appears to require two separate reports, one for each category of employees. (See Gov. Code § 12999, subd. (a)(2).)
    [3] SB 1162 does not alter pay data reporting obligations for 2021 or 2022, which were due on or before March 31 of each of those years. (Gov. Code § 12999, subd. (m).) The legislation also does not eliminate the possibility of administrative enforcement actions for failure to comply with reporting requirements in those years. (Ibid.).
    [4] An “establishment” is defined as “an economic unit producing goods or services.” (Gov. Code § 12999, subd. (k)(3).)
    [5] “Individually identifiable information” means “data. . . that is associated with a specific person or business.” (Gov. Code § 12999, subd. (g).)
    [6] A “pay scale” means the salary or hourly wage range that the employer reasonably expects to pay for the position. (Lab. Code § 432.3, subd. (m).)

    Posted on: September 28, 2022 Tags: Categories: Publications

  • Investigating Off-Duty Conduct Considering Privacy/Constitutional Concerns

    Coblentz partner Hannah Jones will be presenting the breakout session “Investigating Off-Duty Conduct Considering Privacy/Constitutional Concerns” during the 2022 Association of Workplace Investigators Annual Conference. Her session takes place on October 13 and will cover practical strategies for investigating off-duty conduct including how to scope the issue, deal with third party witnesses and review evidence in a manner as not to impinge on employee’s privacy and other constitutional rights. For more details and to register, please click here.

    Posted on: September 22, 2022 Tags: Categories: Events, News

  • 2022 Housing Legislation Overview – Major Pending Bills on the Governor’s Desk

    The 2021-2022 California Legislative Session closed on August 31 and was dominated by further efforts to address the state’s continued housing crisis. The flurry of major legislation passed by the Legislature and now on the Governor’s desk for signature focuses on expanding the types of development sites eligible for housing production and streamlining approval of that housing (AB 2011, SB 6, AB 2234), expanding the Density Bonus Law and providing enhanced density incentives (AB 682, AB 1551, AB 2334), and restricting minimum parking requirements (AB 2097). Taken together, these are potentially powerful tools to generate new housing opportunities as cities across California face significant housing production goals and work towards meeting state law deadlines for the ongoing Housing Element updates in the coming months.

    This post focuses on the key housing-related bills that are, at the time of this publication, awaiting the Governor’s signature. The Governor has until September 30 to either sign or veto the bills. We will follow up with more in-depth coverage on the legislation ultimately signed by the Governor and insights on the resulting potential impacts on the housing landscape.

    Repurposing Commercially Zoned Land for New Residential Development

    The two blockbuster bills of 2022 – AB 2011 and SB 6 – both have the potential to result in major changes to the housing development pipeline by allowing new qualifying residential development on eligible commercially zoned sites. Both bills are the result of significant and hard-won efforts among legislators, development and pro-housing advocates, and organized labor. Each bill includes very specific eligibility requirements, applicable development standards, and density calculation metrics. The details are beyond the scope of this analysis, but the highlights are described briefly below. If signed by the Governor, both laws would take effect on July 1, 2023 – not in January 2023, as is the case for most new laws – and would remain in effect for 10 years, sunsetting in 2033 unless extended.

    AB 2011 (Wicks) [Streamlined Approval Pathway for Qualifying Affordable or Mixed-Income Developments] – AB 2011 provides a streamlined, ministerial review process that is CEQA-exempt, comparable to the existing SB 35 law (see our previous posts on SB 35 here and here), for qualifying multifamily housing development projects on commercially zoned sites (where office, retail, or parking are principally permitted uses) that include requisite affordable housing units and meet certain wage and labor requirements, including paying prevailing wage. The goal of AB 2011 is to unlock significant affordable and mixed-income housing development potential in existing commercial zones.

    The bill creates two primary pathways to qualify for its protections: (i) 100% affordable projects located on a commercially zoned site, or (ii) mixed-income projects located along a “commercial corridor,” meaning a street with a right of way width between 70 and 150 feet. The affordability requirements applicable to mixed-income projects are:

    • Rental: (i) 8% very low income and 5% extremely low income, or (ii) 15% low income; and
    • For-sale: (i) 30% moderate income, or (ii) 15% low income.

    AB 2011 also requires development proponents to meet certain wage and labor standards, including that construction workers be paid at least the general prevailing rate of wages (but not requiring a “skilled and trained workforce” as required under SB 6). For developments of 50 or more housing units, construction contractors must also participate in an apprenticeship program or request dispatch of apprentices from a state-approved apprenticeship program, and make specified health care expenditures for construction craft employees.

    AB 2011 imposes a detailed list of specific site exclusions, similar to the existing SB 35 ministerial streamlining site requirements, which must be reviewed on a site-specific basis to determine whether a project would potentially qualify for the bill’s protections.

    SB 6 (Caballero) [Residential Use of Commercially Zoned Property Without Requiring Rezoning] – Similar to AB 2011, SB 6 allows qualifying housing or mixed-use development projects as a permitted use on commercially zoned (office, retail, or parking) parcels of 20 acres or less without requiring rezoning or other legislative approvals. However, SB 6 differs from AB 2011 in some important ways, including that it:

    1. Does not provide a new streamlined ministerial or CEQA-exempt approval pathway for these housing or mixed-use projects, which therefore may leave some discretion to local jurisdictions, although existing SB 35 streamlining can be used for SB 6 projects, so streamlining could be available, depending on the jurisdiction;
    2. Mandates that applicants not only commit to prevailing wages but also to a more robust and cost-intensive “skilled and trained workforce” requirement for construction work (unless fewer than two bids are received, in which case this heightened requirement does not apply during the rebid);
    3. Does not mandate housing affordability requirements, although local inclusionary requirements may still apply; and
    4. Contains fewer site-specific exclusions than AB 2011.

    In sum and as a comparison, AB 2011 provides a streamlined approval process for affordable and mixed-income projects and does not require the use of a skilled and trained workforce, but the location restrictions, particularly the “commercial corridor” requirement for mixed-income projects, make its use more limited, whereas SB 6 more broadly allows residential or mixed-uses on commercially zoned parcels and does not have an affordability requirement, but it does not provide any streamlining and imposes more rigorous labor standards. Both bills would provide eligible projects with protection under the Housing Accountability Act, which limits a local agency’s ability to disapprove or condition the project to reduce density. Determining which applies to a site and which option is preferable will require a site-specific analysis.

    Coblentz attorneys have extensive experience with the state’s latest housing laws, including SB 35, the Housing Accountability Act, and Density Bonus Law, and can help to navigate these newest complexities and opportunities.

    Restricting Mandatory Minimum Parking Requirements Near Public Transit

    AB 2097 (Friedman) – AB 2097 would generally prohibit a local agency from imposing minimum parking requirements on any residential, commercial, or other development project located within half a mile of a “major transit stop,” meaning existing or planned rail/bus rapid transit stations, a ferry terminal, or two or more bus lines with 15-minute frequencies during commute hours. The bill provides exceptions for local agencies to impose minimum parking standards for developments within half a mile of public transit if the agency makes specific written findings establishing that removing minimum parking standards would have a “substantially negative impact” on the jurisdiction’s ability to meet its state mandated affordable housing obligations; on special housing needs for the elderly or those with disabilities; or on existing residential or commercial parking within half a mile of a housing development project. However, local agencies would not be able to utilize that carve out for residential projects that contain less than 20 housing units or dedicate 20% of units to very low-, low-, or moderate-income households, students, the elderly, or persons with disabilities. AB 2097 would not make any changes to requirements for parking spaces for electric vehicle charging or persons with disabilities.

    AB 2097 is a two-year bill that faced opposition last year from some affordable housing advocates who argued that eliminating minimum parking requirements could weaken developers’ incentive to utilize the state Density Bonus Law, which requires a minimum percentage of affordable housing units in exchange for providing relief from development standards, including parking requirements. The Governor is anticipated to hear similar arguments again this year as he considers this bill.

    Key Changes to Density Bonus Law

    AB 682 (Bloom) [New Provisions for Shared Housing Buildings and Revised Base Density Rules] – AB 682 expands the existing state Density Bonus Law program to apply to shared housing projects that provide qualifying percentages of affordable units. Shared housing projects are defined as residential or mixed-use structures with five or more shared units designed for permanent residential use of more than 30 days (i.e., dwellings that include a bathroom and kitchenette features) that share one or more common kitchens and dining areas. These qualifying shared housing projects may also include non-shared residential unit types or commercial uses subject to certain limitations and requirements.

    AB 682 also makes several important changes to the definitions of “maximum allowable residential density” and “base density” that would impact how base density and resulting bonus density must be calculated per project. The bill states that density shall be calculated based on dwelling units per acre (DU/A), but if the applicable local land use controls do not provide this type of DU/A standard, then AB 682 would require that base density instead be calculated by estimating the realistic development capacity of the site based on applicable objective standards. Also, in the event that the base density allowed under the applicable zoning is inconsistent with the density allowed under an applicable specific plan or general plan, AB 682 would require that the greater of the density applies – under current law, the general plan density prevails in the event of conflict. Overall, these proposed changes may prove helpful in reducing ambiguity for calculating base and bonus density for these projects and ensuring that Density Bonus Law is interpreted in favor of producing the maximum number of housing units.

    AB 1551 (Santiago) [Reinstating Density Bonuses for Commercial Projects] – AB 1551 reinstates the expired density bonus program for commercial/non-residential developments (previously enacted under AB 1934 in 2016). This would allow a commercial developer to obtain one of six commercial density bonuses – for example, 20% increases in floor area ratio, height or development intensity – by partnering with a housing developer to provide qualifying affordable housing (at least 30% total units available to low-income tenants, or 15% affordable to very low-income tenants) through either directly building affordable housing units, donating land for affordable housing units, or providing direct funding to an affordable housing developer for development of an affordable housing project. This commercial density bonus program would be extended through January 1, 2028.

    Data provided to HCD indicates that this commercial density bonus program was not widely utilized when previously in effect from 2016 to 2022, and it is unclear whether developers will now take advantage of the same provisions, as extended through 2028.         

    AB 2334 (Wicks) [Enhanced Density Bonuses for Qualifying Affordable Projects in Low VMT Areas] – AB 2334 expands the Density Bonus Law to allow 100% affordable housing projects to receive unlimited density and a height increase of 33 feet or three stories if located within qualifying “very low vehicle travel areas” in 17 qualifying counties (Alameda, Contra Costa, Marin, Napa, San Francisco, San Mateo, Santa Clara, Solano, Sonoma, Los Angeles, Orange, Riverside, San Bernardino, San Diego, Ventura, Sacramento, and Santa Barbara). “Very low vehicle travel area” is defined as an “urbanized area . . . where the existing residential development generates vehicle miles traveled [VMT] per capita that is below 85[%] of either regional [VMT] per capita or city [VMT] per capita,” and additional analysis will be required at the local level to determine what specific areas within each county qualify for this enhanced density bonus.

    This bill builds on the density bonus framework adopted under AB 1763 in 2019, which allowed for an enhanced density bonus for qualifying housing projects but only within a half mile of a major transit stop. AB 2334 aims to increase the number of eligible project sites to include all qualifying sites within very low vehicle travel areas that otherwise might lack the level of public transportation service required under AB 1763.

    Streamlining Post-Entitlement Permitting Issuance

    AB 2234 (Rivas) [New Deadlines and Process for Review and Approval of Post-Entitlement Permits] – AB 2234 establishes time limits and other procedural streamlining changes for review and approval of post-entitlement permits related to housing development projects. These time limits are similar to those required for initial entitlements and approvals under the Permit Streamlining Act but do not apply to post-entitlement permits. The categories of post-entitlement permits covered by this new law include permits for demolition, most excavation and grading permits, building permits, and permits for most offsite improvements. In brief, AB 2234 requires that a local agency determine whether an application for a post-entitlement phase permit is complete and provide written notice of its determination within 15 business days after application submission. If the local agency fails to meet initial deadlines, the permit application may be deemed complete. Once the application is complete, the local agency then has a relatively short window to approve or deny the application, 30 business days for projects with 25 units or fewer and 60 business days for projects with 26 units or more. Local agencies may extend these timelines by making written findings that the post-entitlement phase permit might have a specific, adverse impact, as defined, on public health or safety and that additional time is necessary to process the application. Notably, a violation of AB 2234 requirements constitutes a violation of the Housing Accountability Act, which establishes penalties – including potential monetary fines – for violations by cities and counties. Other limitations and carve outs apply, so close review of this bill is required to determine specific applicability.

    The Coblentz Real Estate team continues to track changes in state and local legislation impacting housing production. Please contact us for additional information and any questions related to the impact of these new bills on land use and real estate development.

     

     

     

    Posted on: September 13, 2022 Tags: Categories: Blogs