Quick Hits
- California’s SB 1237 raises the maximum civil penalty for a second or later failure to file a required pay data report from $200 per employee to $1,000 per employee.
- The penalty for the first failure to file stays at up to $100 per employee.
- The amended statute takes effect January 1, 2027, and this year’s pay filing deadline is May 12, 2027.
Covered Employers
Covered employers include private employers with one hundred or more employees with at least one employee working in California. A separate report is required for employers with one hundred or more employees hired through labor contractors with at least one active employee in California. These low thresholds mean that employers with even a small number of California employees and/or labor contractors need to be careful to understand their reporting requirements and ensure they are in compliance.
A Fivefold Increase for Repeat Failures
Under Section 12999, if CRD does not receive the required report, it may seek a court order requiring the employer to comply and may recover the costs of seeking that order. At CRD’s request, a court must impose a civil penalty of up to $100 per employee for the first failure to file. Before SB 1237, the penalty for a subsequent failure was capped at $200 per employee. SB 1237 raises that cap to $1,000 per employee. Penalties are paid into the Civil Rights Enforcement and Litigation Fund. If an employer cannot file a complete and accurate report because a labor contractor did not provide the required pay data, the court may assign part of the penalties to that labor contractor.
This is a major change. Because the penalty is calculated per employee, the exposure grows quickly. For an employer with 2,000 employees, the maximum penalty for a second failure to file a required report rises from $400,000 to $2 million. The change also builds on SB 464, which already requires courts to impose civil penalties on noncompliant employers when CRD asks.
A New Tool for CRD to Force Compliance
The higher penalty gives CRD much more leverage. CRD’s enforcement process already moves through a series of escalating notices: a notice of potential noncompliance, then a notice of noncompliance, then a notice of impending court action, and finally a lawsuit. In its 2023 action against Cambrian Homecare, Inc., the employer filed all of its missing reports within three weeks of being sued. The employer ultimately agreed to pay a $70,000 penalty for its unfiled 2022 report, plus $24,778 in litigation costs. With a $1,000 per-employee ceiling for repeat failures, an employer that ignores CRD’s notices faces far greater financial consequences.
Avoiding an Interruption in Filings
CRD’s two most recent lawsuits show that employers that once filed and then stopped filing are a key enforcement target. On September 14, 2026, CRD filed petitions to compel compliance against two employers that allegedly had previously filed pay data reports but then stopped filing for multiple years, even after being reminded of their obligations.
- California Food Management LLC (d/b/a Burger King). CRD alleges the company did not file reports for reporting years 2023, 2024, and 2025, even though it had filed a certified report for 2022. According to CRD, the company did not respond to notices sent in September 2025, January 2026, and April 2026. CRD is seeking $100 per employee for 2023 and $200 per employee for 2024 and 2025.
- Coast 2 Coast Coaching, Inc. (d/b/a Elevo and Sports for Learning). This employer has more than 2,100 employees. CRD alleges it did not file reports for 2024 and 2025 after filing for 2021 through 2023. CRD is seeking $100 per employee for 2024 and $200 per employee for 2025.
In both cases, CRD is seeking the higher “subsequent failure” penalty for the later years. Under SB 1237, that higher tier will reach up to $1,000 per employee. Gaps in filing like these can come from a variety of events including personnel turnover, changes in who is responsible for compliance, mergers or reorganizations, or changes in payroll or HR vendors.
Employers may want to consider taking steps to ensure that there are no interruptions in their pay reporting. These steps can include actions such as:
- following up on personnel changes in the compliance reporting area to ensure that the responsibility for pay reporting is established and maintained when personnel changes occur;
- annually updating (or more often as required) CRD contact information within the pay reporting portal so that company addresses are current to make sure that all pay reporting mailings are directed to the correct address so that they receive immediate attention;
- using pay reporting contact email addresses that are received by multiple employees in an effort to broaden the audience for important pay reporting updates; and
- maintaining a centralized document repository for all completed pay filings so that filings can be accessed by more than the individual responsible for filing.
Never Filed? CRD Can Find You
Employers that have never filed pay reports should not assume they are out of view simply because they are not in CRD’s pay data reporting system. Section 12999 requires California’s Employment Development Department (EDD), which handles unemployment compensation, to give CRD, within sixty days of CRD’s request, “the names and addresses of all businesses with 100 or more employees” to “ensure compliance with this section.” CRD can compare that list against the reports it receives to identify employers that have never filed. Those employers could then face the same escalating notices and court action.
New CRD Publication Requirement
For the first time SB 1237 requires CRD to publish annually the total number of pay data reports submitted. This information must be published in aggregate, in a way reasonably calculated to prevent any data from being linked to an individual business or person. These annual totals could make drops in filing activity more visible and could be used by CRD to gauge how many employers are failing to make their required pay data filings, which could lead to increased enforcement actions.
Major Employee Mapping Change 2026 Reporting
Effective January 1, 2027, pay reporting will no longer rely on EEO-1 categories; instead, all employees must be classified into one of twenty-three standard occupational classification (SOC) job categories. This will require substantial work by filers, as employers have traditionally mapped their employees to EEO-1 categories and have not used SOC codes for employee mapping. These twenty-three categories are based on SOC categories and are a significant expansion from the ten options provided by the EEO-1 categories.
While these categories have limited parallels to EEO-1 categories, their focus on the subject matter of the work performed differs significantly from the EEO-1 categories’ focus on corporate structure. For instance, the twenty-three categories include “Business and financial operations occupations,” “Computer and mathematical occupations,” and “Architecture and engineering occupations,” each of which could presumably span more than one of the existing EEO-1 categories. This illustrates the major shift in how employees will be classified, beginning with the 2026 pay reports. Based on this substantial shift in employee classification, filers—including both employers and labor contractors—may want to consider putting together plans to begin reclassifying employees into these twenty-three categories.
Key Takeaways for Employers
With the higher penalties taking effect January 1, 2027, and in light of the May 12, 2027, pay filing deadline, employers may want to consider:
- confirming whether they are covered and file all required payroll employee and labor contractor employee reports;
- checking for and determine action plans with respect to any gaps in past filings;
- ensuring that personnel and company changes do not result in missed filings;
- responding promptly to any CRD notice; and
- preparing for the expansion to twenty-three SOC job categories beginning in 2027.
Ogletree Deakins’ California offices, Government Contracting and Compliance Practice Group, Pay Equity Practice Group, and Workforce Analytics and Compliance Practice Group will continue to monitor developments with respect to California pay data reporting and will provide updates on the firm’s California, Government Contracting and Compliance, Pay Equity, and Workforce Analytics and Compliance blogs as additional information becomes available.
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