The Equal Employment Opportunity Commission has proposed expanding the types of information it collects about employee pay on the so-called Employer Information Report, known as EEO-1.
The EEOC’s stated goal is to assist both employers and the agency in spotting possible pay discrimination. In a press release, EEOC Chair Jenny R. Yang said, “Collecting pay data is a significant step forward in addressing discriminatory pay practices. This information will assist employers in evaluating their pay practices to prevent pay discrimination and strengthen enforcement of our federal anti-discrimination laws.”
The EEOC enforces federal laws prohibiting employment discrimination, including the Equal Pay Act of 1963. That law prohibits sex-based wage discrimination between men and women if they work in the same establishment and perform jobs that require substantially equal skill, effort and responsibility under similar working conditions.
The current EEO-1 directs employers to report data about employees’ ethnicity, race and gender across 10 job categories. Currently the EEO-1 must be completed by 1) private employers with 100 or more employees; and 2) private employers who have both 50 or more employees and a federal contract, subcontract or purchase order worth $50,000 or more.
The changes proposed last month add a salary component to companies’ reporting requirements. In addition to the data they already report, companies are being asked to collect data on employees’ W-2 earnings and hours worked. And for the 10 job categories covered by the EEO-1, they also must report W-2 data across 12 pay bands, or levels, defined by the U.S. Bureau of Labor Statistics. As explained by the EEOC: “Employers will simply count and report the number of employees in each pay band. For example, a filer will report on the EEO-1 that it employs three African American women as professionals in the highest pay band.”
The EEOC proposal attempts to normalize the effect of part-time or partial-year employment by requiring employers to report aggregate hours worked by employees in each job category and pay band. For example, an employer may report that ten Hispanic males who are craft workers in the second pay band worked a total of 10,000 hours.
There would be no change for the 2016 reporting cycle. However, beginning in 2017, employers with 100 or more employees will submit the revised EEO-1. Federal contractors with 50 to 99 employees will continue to submit the same information collected on the current EEO-1 report.
In selecting total W-2 earnings as the measure of pay, the EEOC said it hoped to minimize the burden on employers. No doubt employers that are required to file an EEO-1 already maintain employees’ W-2 earnings in the ordinary course of business. For the revised EEO-1, however, employers are being asked not to use year-end data, but to submit earnings for a 12-month period ending during a pay period between July 1 and Sept. 30. Employers can pick the pay period, but the date range still may not align with the pulling of some wage data, such as commissions.
Furthermore, even if wage data is readily available, its categorization into specific pay bands for various job categories may not be so easy. The meaning of this data in assessing pay equity is also questioned, as eligibility for overtime, commissions and bonuses typically is not the same for full-time versus part-time or partial-year employees.
More problematic would be the compilation of hours worked in each job category. I find it difficult to fathom how this data would be compiled for salaried workers, where the vast majority of employers do not tally the actual hours worked. Given these data-gathering issues, the EEOC’s estimate of 6.6 additional burden hours to comply with the new requirements appears low, to say the least.
Finally, there is the question of how the EEOC intends to use the data. It states that the proposed changes will allow it to focus enforcement resources on employers that are more likely to be out of compliance with federal laws, even though some pay disparities may be explained by differences in education, seniority or level of experience. Since otherwise protected EEO-1 data can be used in litigation, there are also concerns that it will be sought by plaintiffs’ attorneys in class-action cases.
Companies that will be affected by the new EEO-1 reporting requirements may want to submit comments to the EEOC’s proposal by the deadline of April 1. Companies also may want to consider proactively examining their pay policies and practices with a self-audit.