CA Governor Signs Major Diversity Bills

September 30^th, 2020, was the last day that California Governor Gavin Newson could sign bills passed by the state legislature. On that day, Newsom signed two diversity bills into effect addressing state racial injustice. These bills closed a busy California legislative season that saw more than 30 employment-related laws also signed by the governor. Previously signed bills include those addressing independent contractor designations, expanded paid sick leave, and COVID-19-related employment laws.

Diversifying Company Boards of Directors

Assembly Bill (AB) 979 requires publicly-held California corporations to diversify their boards of directors with “directors from underrepresented communities.” This needs to take place by December 31st, 2021. AB 979 is similar to California Senate Bill (SB) 826, signed into law in 2018. SB 826 requires publicly-held corporations headquartered in California to include women on their boards.  Under AB 979, a “director from an underrepresented community” is an individual who self-identifies as:

• Black,
• African American,
• Hispanic,
• Latino,
• Asian,
• Pacific Islander,
• Native American,
• Native Hawaiian, or
• Alaska Native.

Those who self-identify as gay, lesbian, bisexual, or transgender are also included in the definition. Foreign and domestic publicly-held corporations with executive offices in California also must comply with AB 979. Those companies must have at least one director from an underrepresented community on their boards by December 31st, 2021.  Similarly, by December 31st, 2022:

• Boards with nine or more directors must have a minimum of three directors from underrepresented communities.
• Boards with more than four but less than nine directors must have a minimum of two directors from underrepresented communities.

Corporations may increase the number of directors on their boards to comply with the requirements listed above. Starting March 1st, 2022, the California Secretary of State will publish annual reports documenting compliance with these diversification requirements. Companies that fail to comply are subject to fines of $100,000 for the first violation and $300,000 for subsequent violations.

Pay Data Reporting

In an attempt to reduce gender and racial pay gaps, SB 973 was also signed into law. Beginning in 2021, certain California employers have to collect information on employee pay data by gender, race, and ethnicity. The information is then submitted annually to the California Department of Fair Employment and Housing (DFEH). Specifically, the new law covers:

• Employers with 100 or more employees; and
• Employers that must file an annual Employer Information Report (EEO-1) under federal law.

The annual report submitted to the DFEH must include the number of employees (and the hours they worked):

• By race, ethnicity, and sex;
• In each of the Job Categories in the federal EEO-1 Report; and
• Whose annual earnings fall within the pay bands used by the U.S. Bureau of Labor Statistics.

Employers with multiple establishments must submit a report for each establishment and a consolidated report that includes all employees. The first report is due on March 31st, 2021.

Employer Takeaways

Even though the laws discussed are specific to California, employers in all states should be familiar with possible diversity and anti-discrimination laws affecting them. California employers covered by these laws should review and revise their policies on diversity and inclusion, if needed. Employers should also address any questions stemming from these new laws with their legal counsel.