New Race/Ethnicity Category and Reporting Requirements
The California Civil Rights Department (CRD) has released new guidance for the upcoming pay data reporting cycle in 2024, featuring important adjustments to race and ethnicity classifications while keeping much of the previous reporting structure intact.
One of the most significant changes to California’s reporting requirements is the addition of a new racial/ethnic category: “Middle Eastern or North African” (MENA).
This update will take effect for the 2024 reporting period.
Employers are required to file their 2024 pay data reports by May 14, 2025.
The portal for new submissions opened on February 3, 2025.
California law mandates that employers provide payroll reports not only for their direct employees but also for those employees hired through labor contractors.
- Every private company in California with 100 or more employees—including those who work through labor contractors—must submit a pay data report to the CRD annually.
- This report must detail employee compensation, demographic information, and various workforce metrics, including average and median hourly earnings broken down by race, ethnicity, and gender across different job classifications.
- Failing to comply can lead to fines of up to $100 per employee for initial violations and $200 for repeated offenses.
Changes in Race and Ethnicity Classifications
In response to a directive from the U.S. Office of Management and Budget (OMB) aimed at revising race and ethnicity data collection standards, the CRD has introduced the MENA category for 2024.
The updated California Pay Data Reporting Handbook specifies that this category encompasses individuals with Middle Eastern or North African heritage, such as those of Lebanese, Iranian, Egyptian, Syrian, Iraqi, and Israeli descent.
Additionally, the terminology “Two or More Races” will now be referred to as “Multiracial and/or Multiethnic.” The prior “Other” label for the “Native Hawaiian or Other Pacific Islander” category has been streamlined to simply “Native Hawaiian or Pacific Islander.” Employers must now use the revised set of race, ethnicity, and sex codes reflecting these updates.
When reporting, employers should categorize employees as MENA whenever possible.
However, if data is limited, they can continue to follow previous U.S. Equal Employment Opportunity Commission (EEOC) guidelines from the EEO-1 survey.
For instance, if an employer has gathered self-identification data that includes MENA, they can use that information.
If not, they must report these employees under the “White” category based on 2023 EEO-1 instructions, meaning earlier data collection procedures can still apply for the 2024 reports.
Consistency in Reporting Standards and New Resources
While the modifications to race and ethnicity categories are noteworthy, many reporting criteria from 2023 remain unchanged.
Here are some aspects where continuity exists:
- The definitions governing which labor contractor employees are included in the 2024 reports remain the same.
Employers had hoped for clearer explanations, but the guidance largely reiterates what was provided last year.
- The twelve pay bands established in 2023 continue to be relevant for 2024.
Employees will still be classified into these bands based on their W-2 wages.
- Although client employers are advised to report labor contractors that provide incomplete data, this action is not mandatory.
- In maintaining the standards from the previous year, the new guidelines require the ongoing identification of remote workers, regardless of their location—whether inside or outside California.
- The CRD clarified that labor contractors must supply data from the client employer’s facility where the workers are deployed, rather than their own offices, resolving a common area of confusion.
In preparation for the 2024 reporting process, the CRD has rolled out several enhanced resources.
Notably, for the first time, there is a comprehensive 2024 California Pay Data Reporting Handbook available.
While the CRD previously provided FAQs and guidance, this year marks a significant shift with the introduction of a dedicated handbook.
Spanning twenty-three pages, it is carefully structured to guide users through the filing requirements, submission processes, and other relevant information, aiming for clarity and ease of use compared to previous more complicated FAQs.
In addition, the 2024 cycle will feature detailed instructions for completing the payroll and labor contractor employee reporting templates.
Unlike past years when instructions were embedded within each template, the new format presents them in two separate ten-page documents.
This change allows for thorough guidance, with specific directions and clarifications regarding data entry standards, acceptable data types, and character limits.
Employers should assess their preparedness to meet the 2024 pay data reporting requirements if they have yet to do so.
Source: Natlawreview.com