California Releases New and Updated Answers to SB 1162 FAQs

Last week, the California Civil Rights Division released new and updated answers to frequently asked questions regarding SB 1162, California’s new pay data reporting law. Among other things, the newly released answers clarify three important issues for staffing firms.

Under the law, all staffing firm clients that regularly employed 100 or more total labor contractors during the prior reporting year must file a Labor Contractor Employee Report. The FAQs now clarify that a staffing firm that knows or reasonably should know that its client employed 100 or more total labor contractors has a duty to supply relevant pay data information to its client; the staffing firm should not wait for the client to specifically request the information. However, when a staffing firm reasonably does not know whether its client employs 100 or more total labor contractors, the firm need only supply data to its client upon request. The CRD encourages staffing firms to reach out to their clients to inquire which, if any, has a filing obligation.

Second, the FAQs clarify that staffing agencies serving as prime contractors and subcontractors for a given client each have an independent obligation to send pay data information to the end client. A prime contractor has an additional obligation to ensure that its subcontractors send the required information. The CRD also notes that prime and subcontractor pay data should be maintained separately and not merged.

Third, regarding selecting the appropriate work establishment for their own Payroll Employee Reports, staffing firms may use their own physical establishment or their clients’ work sites, as long as the latter selection comports with the rules for assigning employees to establishments (mentioned elsewhere in the FAQs). However, when providing data for their clients’ Labor Contractor Employee Reports, staffing firms should select their clients’ establishments. Staffing firms and their clients should work together to identify these establishments prior to staffing firms providing the required data to their clients.

Although the FAQs are not numbered, for ease of reference the following are CRD’s new FAQs that specifically pertain to staffing agencies or their clients:

1. E. ADDITIONAL INFORMATION – LABOR CONTRACTOR EMPLOYEE REPORTS

What is “labor… within the client employer’s usual course of business,” such that workers performing that labor are “labor contractor employees” who must be reported on?

Because a labor contractor may not know whether any client is obligated to file a Labor Contractor Employee Report, is a labor contractor only required to provide data to a client employer upon a client’s request for the data?

At times, labor contractors act as prime contractors and use subcontractors to help meet their clients’ staffing requirements. For purposes of pay data reporting, is the prime contractor also a “client employer” required to file a Labor Contractor Employee Report?

If a labor contractor uses a subcontractor to supply employees to a client employer, is the prime labor contractor or its subcontractor required to provide the client employer with the data needed to complete its Labor Contractor Employee Report?

If a labor contractor uses a subcontractor to supply employees to a client employer, should the prime contractor and the subcontractor merge their data, or should the client employer merge the prime contractor’s and subcontractor’s data?

1. A. ESTABLISHMENTS

Should a labor contractor, when filing its own Payroll Employee Report, assign employees to its own establishment(s) or the establishment(s) of the client employer?

Should a labor contractor use the client employer’s establishment when providing the necessary data for the client employer’s Labor Contractor Employee Report?

Finally, a reminder that the law requires staffing agencies to report to the state employee data by race, ethnicity, and sex, and also requires staffing agency clients to submit separate reports covering the employees provided by staffing agencies. Because staffing agencies have not historically maintained race and ethnicity data for their employees, the FAQs—at the urging of ASA—allow “unknown” to be reported for those employees. This exception, which only applies for the 2022 reporting year, applies to both staffing agency and client pay data reports. Clients can report “unknown” on their labor contractor employee reports, and staffing agencies can report “unknown” on a special staffing agency “payroll employee report” that can be obtained only upon written request to the CRD. “Unknown” can be selected only where that information is in fact unknown and not reasonably obtainable before the filing deadline.

The special staffing agency Payroll Employee Report template, which includes the “unknown” race/ethnicity and gender option, can be obtained only by emailing CRD at paydata.reporting@dfeh.ca.gov. This template will not be available at calcivilrights.ca.gov.