California has become the first state to pass a law requiring venture capital companies to report diversity data from portfolio company founders. The law, which will take effect on March 1, 2025, mandates that covered entities disclose information about the founding teams of businesses in which they made a VC investment in the previous calendar year. The required information includes gender identity, race, ethnicity, disability status, sexual orientation, veteran status, and California residency. Additionally, covered entities must report the total number and dollar amount of VC investments made to businesses founded by diverse teams. Failure to comply with the law may result in enforcement actions by the California Civil Rights Department. VC companies subject to the California Consumer Privacy Act must also provide a privacy notice to California resident founders. While the law may face legal challenges, VC companies should prepare to collect the necessary information for investments made in 2024.
In addition to the VC diversity reporting law, California has also enacted a new law to protect the privacy of gender identity. The law prohibits the release of a person's gender identity in court proceedings without their consent. It also allows individuals to request that their gender identity be sealed in court records. The law aims to prevent discrimination and harassment against transgender and nonbinary individuals and will go into effect on January 1, 2023.
Source: The Employer Report [76935b4d], California enacts new law to protect gender identity privacy [e2831aaf]