California has enacted Senate Bill 1237, amending the state’s pay data reporting law to significantly increase penalties for employers that repeatedly fail to submit required pay data reports to the Civil Rights Department (CRD). The law also requires the CRD to publish annual information regarding the total number of pay data reports submitted. The amendments become operative on January 1, 2027.
Background
California law requires certain private employers to annually submit pay data reports to the Civil Rights Department. These reports are intended to assist the state in identifying potential pay disparities and workplace equity issues.
Currently, employers with 100 or more employees must submit annual pay data reports containing information regarding employee demographics, pay bands, and compensation data. Employers with 100 or more workers hired through labor contractors must also submit separate labor-contractor employee reports.
The reports include information such as:
- Employee counts by race, ethnicity, and sex;
- Employee counts within specified pay bands;
- Median and mean hourly rates by race, ethnicity, and sex within job categories; and
- Other workforce demographic and compensation information.
Covered Employers
SB 1237 does not change the employers required to file pay data reports.
The reporting requirements continue to apply to:
- Private employers with 100 or more employees; and
- Private employers with 100 or more workers hired through labor contractors during the prior calendar year.
Accordingly, employers below those thresholds generally are not subject to California’s pay data reporting requirements.
Penalties for Repeat Noncompliance Increase Dramatically
The most significant change made by SB 1237 is the increase in penalties for repeat failures to file required reports.
First Failure to File
The law continues to authorize a court, upon request of the Civil Rights Department, to impose a penalty of up to:
- $100 per employee
for an employer’s failure to file a required pay data report.
Subsequent Failures to File
Beginning January 1, 2027, penalties for subsequent failures to file increase substantially.
For a subsequent failure to submit a required report, a court may impose a penalty of up to:
- $1,000 per employee
Previously, the maximum penalty for a subsequent violation was $200 per employee.
As a result, repeat noncompliance may expose employers to significantly greater financial liability.
For large employers, penalties could become substantial. For example, an employer with 500 employees could potentially face penalties of up to $500,000 for a subsequent reporting violation.
Annual Publication of Reporting Statistics Required
SB 1237 also creates a new transparency requirement for the Civil Rights Department.
Beginning in 2027, the department must annually publish:
- The total number of pay data reports submitted under California’s pay data reporting law.
The information must be reported only in aggregate form and must be reasonably calculated to prevent the identification of any individual employer or person.
Confidentiality Protections Remain in Place
The legislation does not change existing confidentiality protections.
Pay data reports submitted to the Civil Rights Department remain:
- Confidential;
- Exempt from disclosure under the California Public Records Act; and
- Protected from public release in individually identifiable form.
The department may continue publishing only aggregate information designed to prevent identification of individual employers.
Labor Contractor Reporting Requirements Remain Unchanged
Employers utilizing labor contractors remain subject to separate reporting obligations.
Covered employers must continue:
- Submitting separate labor-contractor employee pay data reports;
- Identifying labor contractors used to supply workers; and
- Obtaining necessary pay data from labor contractors for reporting purposes.
SB 1237 does not alter these requirements.
Employer Takeaway
Effective January 1, 2027, California employers subject to pay data reporting requirements face significantly increased penalties for repeat failures to submit required reports. While the maximum penalty for an initial failure remains $100 per employee, the penalty for subsequent failures increases from $200 per employee to as much as $1,000 per employee. Employers with 100 or more employees should review pay data reporting processes, compliance calendars, and internal reporting procedures to ensure timely submission of annual reports to the Civil Rights Department.