California’s Department of Fair Employment and Housing (DFEH) published new Frequently Asked Questions (FAQ) sections on their webpage detailing how pay and hours worked are to be reported. They also clarify the questions about establishments. The FAQs can be found here.
DEFH previously published the 12 pay bands in which employees must be reported along with the race/ethnicity, sex, and job category. The new FAQ section directs employers to use W-2 Box 5 Medicare wages and tips to determine the pay bands in which to report pay and hours worked.
DFEH indicates that this is different from the EEO -1 Component 2 report which required employers to use W-2 Box 1 to report pay. The FAQs further explain that W-2 Box 5 wages should be used even if an employee did not work the full year. The wages should not be annualized.
DFEH also deviates significantly from the EEO-1 Component 2 reporting by requiring employers to calculate the actual hours worked by the employee plus the hours the employee was on any form of paid time off for which the employee was paid by the employer (such as vacation time, sick time, or holiday time), if such records are maintained.
DFEH again states that the hours worked requirement is different from Component 2 which did not require time on paid leave to be reported. Below are examples of how to calculate hours worked:
Non-exempt employees: employers should utilize timesheets to calculate the actual hours worked by the employee plus the hours the employee was on any form of paid time off for which the employee was paid by the employer (such as vacation time, sick time, or holiday time).
- If actual hours worked is tracked: utilize timesheets to calculate the actual hours worked by the employee plus the hours the employee was on any form of paid time off.
- Proxy if hours worked is not tracked: Multiply the total number of days worked during the year plus the total number of days on any form of paid time off by the average number of hours worked per day. (Days worked + days on PTO)*average number of hours per day
- If the employer records some exempt employees’ hours worked but does not maintain files for all of the exempt workforce, report the actual hours worked for the tracked employees and may use a proxy for those whose hours are not tracked.
Hours worked should be actual hours and should not be annualized. The example given is:
If a full-time exempt employee (who does not maintain records of her hours) worked on average 8 hours per day, worked for 98 days, and took 2 days of paid sick leave during the Reporting Year, the employer would calculate and report the employee’s hours by multiplying 8 by 100 (800 hours).
Establishment is defined as an economic unit producing goods or services – the same definition used for the EEO-1 report. DFEH acknowledges that there are other work arrangements other than working at company establishments, such as telework, however, they are using the EEO-1 approach to minimize the burden on employers and to be consistent with federal reporting.
The FAQs direct employers to assign employees to the same establishment used for EEO-1 reporting purposes. Some additional guidance is provided:
- Employees must be reported in the establishment to which they are assigned during the snapshot period.
- If an employee reports to more than one establishment during the snapshot period, select the one that the employee reports to for the majority of their work. The FAQs caution that an employer may not avoid reporting on employees working in California by assigning them to an establishment outside of California.
- If an employee changed establishments within California during the year, they should only be reported in the establishment they are assigned to during the snapshot period.
- If an employee is working within California during the snapshot period they must be reported even if assigned to an establishment outside of California.
Berkshire is closely following developments for this reporting requirement. Stay tuned to this blog for further updates as they become available.