PAYROLL DATA REPORTING – Update! (more employers may be required to report)

by Jennifer Kaiser

CIVIL RIGHTS DEPARTMENT UPDATE

As previously blogged here, SB 1162 requires private California employers with 100 or more employees and/or 100 or more workers hired through labor contractors to report pay, demographic, and other workforce information to California’s Civil Rights Department (CRD) annually.

Initially, the guidance provided by the CRD to determine if a worker was considered a “labor contractor employee” was simply an individual 1) on a labor contractor’s payroll, 2) for whom labor contractor is required to withhold federal social security taxes from that individual’s wages, and 3) who performs labor for a client employer within the client employer’s usual course of business.

Since #3 above was not further defined, many reasonably interpreted the reporting to be limited to “temps” hired to supplement typical work performed by the business. Unfortunately, the CRD has recently updated the guidance on their Frequently Asked Questions to clarify that “the client employer’s usual course of business” is much broader than initially believed.

The CRD has expanded the definition of “regular and customary work” as “work that is performed on a regular or routine basis that is either part of the client employer’s customary business or necessary for its preservation or maintenance” and it goes on to offer the following examples:

  • Farmworkers contracted seasonally to pick fruit for a client employer’s farm would be performing work within the client employer’s usual course of business because the work is performed on a routine basis and is part of the client employer’s customary business.
  • Janitorial staff performing nightly cleaning and general maintenance of a client employer’s premises would be performing work within the employer’s usual course of business because the work is performed on a regular basis and is necessary for the maintenance of the client employer’s customary business.
  • Catering staff contracted to serve food at a trucking company’s tenth anniversary party would not be performing work within the client employer’s usual course of business, assuming catering a party is an isolated occurrence for the company.
  • Accountants hired to perform an external audit of a fitness company’s financial statements would not be performing work within the client employer’s usual course of business, assuming financial auditing is an isolated occurrence for the company.

Based on this updated guidance, far more workers may be considered “labor contractors” than were originally anticipated, including other employers generally considered vendors or subcontractors (e.g., janitorial staff, security guards, etc.). Based on the stiff penalties to employers who fail to submit reports ($100 per employee for the first violation and $200 per employee thereafter) employers must evaluate all potential labor contractor workers to ensure that they collect the information they need in order to submit complete pay data reports by this year’s May 10th deadline. Employers who submit their payroll employee data reports by the May 10th deadline may request a two-month extension from the CRD in order to meet their labor contractor pay data reporting obligations.

If you would like guidance, or you have questions regarding your company’s payroll data reporting obligations, please give us a call!