California DFEH Releases New FAQs: Surprising requirements for W-2 Earnings & Hours Worked

The California Department of Fair Employment and Housing (DFEH) updated the FAQs for the new pay data collection as of January 7, 2021 and a few items are a bit unexpected.

Although DFEH has worked to model their pay data collection after the EEOC’s Component 2 data collection, the new FAQs indicate that is not the case for both W-2 earnings and hours worked. DFEH will require employers to use W-2 Box 5 earnings (“Medicare wages and tips”) as opposed to the W2 Box 1 earnings required for the Component 2 reporting.

Additionally, the hours worked calculations will differ from Component 2 requirements. Most notably, DFEH is requiring employers to include paid time off (PTO) hours within their calculations. This should be any PTO for which the employee was paid by the employer (such as vacation time, sick time, or holiday time). The FAQ further details the calculations for nonexempt and exempt workers:

  • Non-Exempt employees: employers should utilize timesheets (or other records) to calculate the actual hours worked by the employee plus the hours the employee was on any form of PTO.

=Actual hours worked + PTO Hours

  • Exempt employees: there are two options for employers:
    • Utilize either timesheets (or other records) to calculate the actual hours worked by the employee plus the hours the employee was on any form of paid time off for which the employee was paid by the employer (e.g., vacation time, sick time, or holiday time) – if available (same calculation as above); and/or
    • Calculate total hours worked by multiplying the total number of days actually worked (plus the total number of days on paid leave) by the average number of hours worked per day by the employee.

=(Days worked + PTO days) * Average numbers of hours per day

DFEH also provides new guidance regarding employees who move from one location to another during the reporting year. If the employee was working within California at any point during the snapshot pay period, the employee should be include them in the filing. For example, if the selection pay period is December 15-31, 2020 and an employee moves from California to a new establishment in another state on December 18, 2020, the employee would be included in the California filing. If an employee worked in California at the beginning of the reporting year but moved to an out-of-state location as of the snapshot period, the employer does not have to include that employee.

Although the above differences to Component 2 should not impact how reports are filed, it will change the data employers need to collect to create their filings. DCI is working to review and digest these new FAQs, as well as monitor for information that is still “coming soon”. Stay tuned.

By Amanda Bowman, M.S., Associate Principal Consultant

 

More information around the California Pay Data Requirement:

California Pay Data Requirement

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