California Senate Bill 464 Sharpens State’s Pay Reporting Teeth

Quick Hits

• Beginning on January 1, 2026, employers and labor contractors will be required to separately collect and store any demographic information for California pay reporting so that the information is separate from employees’ personnel records.
• As of January 1, 2026, when requested by California’s Civil Rights Department, courts will be required to impose civil penalties of $100 per employee for the first failure and $200 per employee for a subsequent failure to file required pay data reports.
• Beginning January 1, 2027, employers will be required to classify all employees in one of twenty-three SOC job categories, and EEO-1 categories will no longer be used.

The biggest change will occur in 2027 when all employees must be placed into twenty-three Standard Occupational Classification (SOC) system categories, as the use of the EEO-1 categories for classifying employees will be discontinued. This will require substantial work by filers, as employers have traditionally mapped their employees to EEO-1 categories and not used SOC codes for employee mapping.

Senate Bill 464 amends Section 12999 of the California Code containing California’s pay data reporting requirements for payroll employers and labor contractors. The bill is actually two bills within the one bill: (1) the first bill which makes two major changes is effective January 1, 2026, will expire on January 1, 2027; and (2) the second bill which maintains the two major changes of the first bill and adds the critical SOC job classification change will be effective as of January 1, 2027, and has no expiration date. The three major changes in SB 464 are discussed below.

Changes Effective as of January 1, 2026

Demographic Information Storage

Employers must ensure that any demographic information gathered by employers or labor contractors for California pay reporting “shall be collected and stored separately from employees’ personnel records.” While some employers might have previously separated California pay reporting data from employee personnel records, this was not previously required. The scope of this requirement will likely be explained in more detail through guidance in the form of answers to frequently asked questions (FAQs) and other future guidance issued by California’s Civil Rights Department (CRD), which administers pay data reporting in the state. However, as currently stated, this requirement is broad and covers all data connected to the annual pay reporting requirement. Based on its effective date of January 1, 2026, employers and covered labor contractors may want to consider implementing plans to keep this data separate from regular personnel files.

Mandatory Imposition of Civil Penalties

The prior pay reporting requirements under Section 12999 stated that a court “may impose” a civil penalty of $100 per employee for the first infraction and $200 per employee for the second and subsequent infractions related to failures to file reports. Senate Bill 464 makes the imposition of these civil penalties mandatory when CRD makes this request to a court. Specifically, the bill states that upon request by CRD, “a court shall impose a civil penalty.” This means that penalties will be much easier to obtain as the court’s discretion to impose penalties will be removed. The mandatory nature of penalties will increase pressure on payroll employer filers, but it would seem to especially ratchet up the pressure on labor contractor filings. This pressure may lead to significantly increased demands by employers for their labor contractors to provide the necessary reporting data. It may also result in increased employer reporting of labor contractors to CRD where labor contractors do not supply the necessary reporting data.

Changes Effective as of January 1, 2027

Discontinued EEO-1 Categories and Implementation of SOC Codes

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 job categories. These twenty-three categories are based on SOC categories and are a significant expansion from the ten options provided by the EEO-1 categories. Based on the effective date of this change, the 2026 pay reports due to be filed on or before May 12, 2027, will require the use of these twenty-three job categories. While these categories have been in use for some time, employers do not commonly use them to categorize their employees. 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.

Conclusion

Senate Bill 464 makes three major changes to the existing California pay reporting requirements. These changes include making civil penalties mandatory when requested by CRD, which will increase pressure to complete these filings. Beginning in 2027, filers will be required to use twenty-three SOC categories to classify employees for reporting purposes instead of the EEO-1 categories currently in use. Collectively, these changes will increase the complexity of reporting while also increasing the potential risk for employers and labor contractors that fail to file the required pay data reports. The changes instituted by SB 464 continue California’s long-term work to continually update its pay reporting requirements, placing additional pressure on filers.

Ogletree Deakins’ Government Contracting and Reporting 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, Cybersecurity and Privacy, Government Contracting and Reporting, Pay Equity, and Workforce Analytics and Compliance blogs as additional information becomes available.

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