Michael Hiltzik: Chase claims it's devoted to diversity. So why didn't it give California the data required by law?

Michael Hiltzik, Los Angeles Times on

Published in Business News

California's statistical demands conform to those that were established by the Obama administration in 2016. In August 2017, however— before the first report deadline arrived the following March — the rule was rescinded by the Trump administration. California proceeded on its own course and implemented a requirement resembling Obama's.

The goal of the pay reports is to enable state regulators to determine whether employers are complying with anti-discrimination laws barring pay disparities by gender, race or ethnic background unless they can be justified by factors such as seniority, merit, education or experience. The law applies to most employers in California with at least 100 employees nationwide.

JPMorgan Chase wasn't the first employer to be sued by DFEH for failing to submit a pay report. That honor belongs to the arts and crafts retail chain Michaels Stores, which operates at more than 100 locations in California among its 1,270 locations nationwide. After the chain failed to respond to three notices that it was in violation of the law, the DFEH filed a lawsuit on May 5.

A Michaels spokesperson told me by email that "we have now submitted all requested data and while we were inadvertently late to submit, we are working closely with the DFEH." The department confirms that it has been in contact with Michaels.

JPMorgan Chase is obviously a bigger fish, with more than 900 California locations out of its 4,900 nationwide, as the department lawsuit documented. But it may not be the last business the DFEH hales into court.

"We estimate there are thousands of employers that are required to file but have not yet done so for the 2020 reporting year," says agency spokeswoman Fahizah Alim.

Still, there is something off-kilter about JPMorgan Chase's explanation for its failure to meet the requirements of a state law in effect for more than a year.

It may be true that some of the state's notifications may have got lost in the mail — the DFEH in its lawsuit even acknowledges that some of its notices were "mistakenly" sent to a headquarters address.

Yet at least three notices were sent to the firm that functions as JPMorgan Chase's registered agent in California — a service that handles official or legal communications and forwards them to the proper office — on Feb. 9, April 20 and May 20. If the firm didn't properly forward the notices, which warned of pending legal action, then it wasn't doing its job and perhaps JPMorgan Chase needs to find a different agent.


But that invites the obvious question of why the biggest bank in the United States needs to be reminded of its legal obligations in the largest state in the union.

JPMorgan Chase had 122,000 employees in 2020, and surely some of them were members a robust compliance department tasked with ensuring that the bank obeys all its legal obligations in all jurisdictions where it does business.

Why should it have to be reminded that it owed California a pay and discrimination report by March 31, 2021? Why was a lawsuit needed to jog its memory?

And why, if the bank were really serious about its commitment "to drive a diverse and inclusive culture for our employees and our business" rather than treating that commitment as a throwaway line on its PR website, was it unaware that it was mandated to document that commitment with facts and figures?

It's hard to escape the conclusion that in this case, as in not a few others, JPMorgan Chase was using its vast size to its advantage. In the past, its daunting bulk and influence has stood it in good stead by intimidating regulators. This time around, perhaps someone in the corporate suite thought the data demands of the state of California were too trivial to bother with.

After all, what's the worst that could happen? Under the law, the most that DFEH can seek from a judge for violating its rules is its legal and court costs, and a court order that the defendant come into compliance.

There are only two real solutions: Break up companies that get so big that they don't know about, or don't care about, legal mandates that affect them on the ground; or raise the penalties so that violating a law aimed at protecting thousands of workers carries real consequences that are visible on a company's bottom line.

If thousands of employers are flouting the law in California, as DFEH believes, then maybe raising the stakes so that every day of noncompliance costs thousands of dollars would raise their awareness.

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