Pay Data Reporting Depends on Usual Business of Client, Contractor

I own a cabinet making and installation company. Last year, my employees spent several days installing cabinets in the offices of a large tech company. I recently received a letter from that tech company asking me for the wages of my employees that worked on the project at the tech company. My customer is claiming that under the rules for pay data reporting, it must report to the state the wages of all its labor contractor employees. I don’t feel comfortable turning over this information to my customer. Does this law require me to provide this information to my customer?

The Pay Data Reporting Act does require a company with 100 or more “labor contractor employees” to report those wages to the state. A “labor contractor employee,” however, is an individual “who performs labor for a client employer within the client employer’s usual course of business.”

In this situation, your customer would be the “client employer,” but because it is in the technology business, and your employees are in the cabinet installation business, your employees were not performing work in your customer’s usual course of business, and therefore, they don’t meet the definition of “labor contractor employees.”

This has been a common misconception by businesses in preparing their pay data reports for the state. Businesses need report only the wages of employees of other companies when those employees are performing work in the usual course of business of the company where the services are being performed.

If you are unsure about whether you should disclose wage information of your employees to third parties, you should always consult legal counsel first in order to avoid any possible privacy issues with your employees.

David Leporiere, Employment Law Expert, CalChamber

CalChamber members can read more about “Pay Data Reporting in California” in EEO Reporting Requirements in the HR Library. Not a member? Learn about the benefits of membership.