BILL ANALYSIS Ó AB 1890 Page 1 Date of Hearing: April 6, 2016 ASSEMBLY COMMITTEE ON LABOR AND EMPLOYMENT Roger Hernández, Chair AB 1890 (Dodd) - As Introduced February 11, 2016 SUBJECT: Discrimination: equal pay: state contracting SUMMARY: Enacts the Equal Pay for Equal Work Act of 2016, related to state contracting, as specified. Specifically, this bill: 1)Provides that an employer with 100 or more employees in the state and a contract with the state of 30 days or more shall submit a description of its nondiscrimination program to the Department of Fair Employment and Housing, and shall be required to submit periodic reports (no more than annually) of its compliance with that program. 2)Specifies that an employer with fewer than 100 employees or a contract of less than 30 days may be required to submit a nondiscrimination program. 3)Provides that a nondiscrimination program shall include policies and procedures designed to ensure equal employment opportunities for all applicants and employees, an analysis of employment selection procedures, and a workforce analysis. AB 1890 Page 2 4)Specifies that the workforce analysis shall include the following: a) The total number of worker with a specific job category identified by worker race, ethnicity, and sex. b) The total wages required to be reported on Internal Revenue Service Form W-2 for all workers in a specific job category identified by worker race, ethnicity, and sex. c) The total hours worked on an annual basis for all workers in a specific job category identified by worker race, ethnicity, and sex. Exempt employees shall be presumed to work 40 hours a week for purposes of this reporting requirement. 5)Provides that an employee in the construction industry covered by a valid collective bargaining agreement shall be excluded from the calculation of the employer's total number of employees for purposes of the nondiscrimination program requirement. 6)Specifies that this bill shall not be construed to negate exemptions to specified requirements in existence on January 1, 2017, as specified. 7)Make related legislative findings and declarations. FISCAL EFFECT: Unknown AB 1890 Page 3 COMMENTS: According to the author, this bill seeks to compile data on gender wage inequity among state contractors and ensure state contractors have policies for preventing unlawful discrimination. Recent Proposed Federal Rule Related to Federal Contractors On August 6, 2014, the U.S. Department of Labor's Office of Federal Contract Compliance Programs issued a Notice of Proposed Rulemaking requiring covered federal contractors and subcontractors with more than 100 employees to submit an annual equal pay report on employee compensation. Covered employers would submit electronically three pieces of information related to employee compensation: 1) The total number of workers within a specific EEO-1 job category by race, ethnicity and sex; 2) Total W-2 wages defined as the total individual W-2 wages for all workers in the job category by race, ethnicity and sex; and 3) Total hours worked, defined as the number of hours AB 1890 Page 4 worked by all employees in the job category by race, ethnicity and sex. A fact sheet released by the Office of Federal Contract Compliance states: "The Equal Pay Report would not collect any individual pay information, or any information on factors such as education or experience that may affect pay. OFCCP would protect the confidentiality of the Equal Pay Report data to the maximum extent permitted under existing law. The agency plans to design a web-based portal for reporting and maintaining compensation information that conforms with applicable government IT security standards. The data will enable OFCCP to direct its enforcement resources toward federal contractors whose summary data suggests potential pay violations, while reducing the likelihood of reviewing companies that are less likely to be out of compliance. OFCCP will also release aggregate summary data on the race and gender pay gap by industry and EEO-1 category to enable contractors to review their pay data using the same metrics as OFCCP and take voluntary compliance measures. By using existing reporting frameworks contractors already maintain in electronic payroll records, including W-2 earnings, and the longstanding categories and definitions that apply to the EEO-1 Report, the agency is avoiding costly new recordkeeping requirements and minimizing to the extent feasible the compliance burden on federal contractors and AB 1890 Page 5 subcontractors. The Equal Pay Report is one component of a larger strategy to address the reality that, despite five decades of extraordinary legal and social progress, working women still earn only 77 cents for every dollar that working men earn. For African American women and Latinas, the pay gap is even greater. The proposal fulfills the Secretary of Labor's responsibility under President Obama's Presidential Memorandum, 'Advancing Pay Equality Through Compensation Data Collection,' to develop a rule requiring federal contractors and subcontractors to submit to DOL summary data on the compensation paid to their employees, including data by sex and race." Recent Proposed Changes to EEOC Reporting Requirements AB 1890 Page 6 On January 29, 2016, the federal Equal Employment Opportunity Commission (EEOC) announced proposed changes to its EEO-1 report, which requires employers to submit employee W-2 earnings and hours worked. Under the proposal, all employers with at least 100 employees (not just federal contractors) would be required to comply. In addition, the proposed changes will require the submission of payroll data broken down by race/ethnicity, in addition to gender. The data would be made available to the EEOC and the Office of Federal Contract Compliance Programs (OFCCP) for enforcement purposes. The proposed rule was published on February 1, 2016 and interested parties have 60 days to submit comments. Existing Requirements Under State Statute and Regulations Existing state law provides that, prior to becoming a contractor or subcontractor with the state, an employer may be required to submit a nondiscrimination program to the Department of Industrial Relations for approval and certification and may be required to submit periodic reports of its compliance with that program. (Government Code Section 12990(b).) Even though the statute uses the term "may" the DFEH regulations provide that all employers who are, or wish to become, contractors with the state "must" develop and implement a AB 1890 Page 7 nondiscrimination program, unless otherwise exempted. (Title 2, California Code of Regulations, Section 11102). The regulations further define a nondiscrimination program to mean "a set of specific and result-oriented procedures to which a contractor or subcontractor commits itself for the purpose of insuring equal employment opportunity for all employees or applicants for employment." (Title 2, California Code of Regulations, Section 11103(a)). The regulations further define three distinct elements of such non-discrimination programs: 1. Analysis of Employment Selection Procedures - the program must include an identification and analysis of contractor promotional and entry-level selection procedures and identify any such procedures that have resulted in disproportionately inhibiting the employment, promotion or retention of minorities or women. 2. Workforce Analysis - the program must contain a workforce analysis, which includes job titles, total number of incumbents by gender and race, and the wage rate or salary range for each job title. AB 1890 Page 8 3. Utilization Analysis - A utilization analysis evaluates the major job groups at a facility in order to determine whether women and minorities are being underutilized when compared to the availability. The regulations specify that this analysis is only required for employers with 250 or more employees. As mentioned above, the regulations contain specified exemptions to these requirements, including for contractors with fewer than 50 employees who provide alternative information. (Title 2, California Code of Regulations, Section 11111). A contractor that does not comply with these requirements may be subject to sanctions "including but not limited to cancellation, termination, or suspension of the contract in whole or in part, by the contract awarding agency or decertification from future opportunities to contract with the State of California by the DFEH." (Title 2, California Code of Regulations, Section 11107). ARGUMENTS IN SUPPORT Supporters argue that pay secrecy and the lack of robust and reliable data on employee compensation impedes our ability to effectively enforce our equal pay laws. In 2014, to address this lack of data, President Obama directed the Secretary of Labor to AB 1890 Page 9 require federal contractors to submit data on employee compensation. Under the terms of the proposed rule, companies that have more than 100 employees and hold federal contracts or subcontracts worth $50,000 or more for at least 30 days would have to submit an annual Equal Pay Report on employee compensation to the Office of Federal Contract Compliance Programs (OFCC). Supporters note that California has a similar nondiscrimination reporting program under the Fair Employment and Housing Act. The Nondiscrimination and Compliance Employment Program (Gov Code § 12990 et seq) is a set of specific and result-oriented procedures to which a contractor or subcontractor commits itself to ensure equal employment opportunity for all employees or applicants for employment. Supporters state that this bill aims to achieve the same goal as the 2014 Presidential Memorandum - to help employers take proactive measures to ensure fair pay for their employees. Simply compiling the data will prompt some businesses to make necessary changes. PRIOR RELATED LEGISLATION This bill is substantially similar to AB 1354 from last year. AB 1354 was vetoed by Governor Brown, who stated the following in his veto message: "This bill requires an employer with 100 or more employees to submit the details of their nondiscrimination program to the Department of Fair Employment and Housing and to submit AB 1890 Page 10 periodic reports of its compliance with that program prior to becoming a contractor with the state. Currently, the department requires all state contractors to develop and implement a nondiscrimination program meeting certain requirements and also certify that they have done so, under penalty of perjury. Furthermore, the department has existing authority to require a contractor to submit this information prior to contracting with the state, if noncompliance is suspected. In light of these factors, I do not believe this bill is necessary at this time." REGISTERED SUPPORT / OPPOSITION: Support American Association of University Women CA Conference Board of the Amalgamated Transit Union California Employment Lawyers Association California Labor Federation, AFL-CIO California School Employees Association AB 1890 Page 11 California Teamsters Public Affairs Council Engineers & Scientists of CA, IFPTE Local 20 National Association of Social Workers - California Chapter Professional and Technical Engineers, IFPTE Local 21 UNITE-HERE Utility Workers Union of America Opposition None on file. Analysis Prepared by:Ben Ebbink / L. & E. / (916) 319-2091 AB 1890 Page 12