New California Laws Add Diversity Requirements for Companies
Author: David B. Weisenfeld, XpertHR Legal Editor
October 9, 2020
California-based public companies will soon face new requirements for diversifying their corporate boards racially, ethnically and in terms of sexual and gender identity. Under AB 979, signed last week by Gov. Gavin Newsom, these companies must:
- Have at least one member of an underrepresented community on its board of directors by the end of 2021;
- Have at least two directors from underrepresented communities on their board by the end of 2022 if they have from five to eight directors; and
- Have at least three directors from underrepresented communities if they have nine or more directors on their board.
In 2018, California became the first state in the nation to require publicly held corporations to have at least one woman on their board of directors. The law includes steep penalty provisions. An employer is subject to a fine of $100,000 for a first violation, and a fine of $300,000 for each subsequent violation.
The new measure expands on that novel law to include representation by people from other underrepresented groups, while mirroring its penalty provisions. It defines underrepresented groups as:
- Pacific Islander;
- Native American;
- Native Hawaiian or Alaska Native; or
- Gay, Lesbian, Bisexual or Transgender.
Pay Data Reporting Requirement
California employers also face new pay data reporting requirements under another law Gov. Newsom signed recently. Under SB 973, a private employer with 100 or more employees must submit a pay data report to the state's Department of Fair Employment and Housing (DFEH) by March 31, 2021, and annually every March 31 going forward, with specified wage information.
The pay data report must include the number of employees by race, ethnicity and sex in each of the following job categories:
- Executive or senior level officials and managers;
- First or mid-level officials and managers;
- Sales workers;
- Administrative support workers;
- Craft workers;
- Laborers and helpers; and
- Service workers.
As part of this reporting requirement, an employer must create a "snapshot" that counts all of the individuals in each job category by race, ethnicity and sex employed during a single pay period of the employer's choice between October 1 and December 31 of the reporting year.
If a covered employer fails to submit a pay data report, the DFEH may seek an order requiring it to comply.
HR Training Requirement
Another new California measure has even more direct implications for HR. Under amendments to the state's Child Abuse and Neglect Reporting Act, HR employees of businesses that employ minors will soon face new training requirements.
The amendments add HR employees of a business with five or more employees that employs minors to the list of individuals required by state mandate to report child abuse and neglect. In addition, for the purpose of reporting sexual abuse, supervisors at these businesses who have direct contact with minors are now mandated reporters.
Covered employers also must provide mandated reporters with training on identifying and reporting child abuse and neglect. Employers that fail to comply could leave not only themselves but their HR employees and supervisors at risk for criminal liability. Under this law, a failure to report specified conduct is a crime punishable by up to six months in a county jail, a fine of $1,000 or both.