Pay Equity and EEO-1 Reporting Remain a Priority of Federal Regulators

Pay inequity, particularly compensation disparity based on sex, has become a very prominent political issue in the last decade and it looks like some additional changes could be on the horizon at the federal level.  Demshutterstock_532208329ocrats expressed that pay equity would be a priority in their labor agenda during the 2018 Congressional election cycle and, in February 2019, a proposal intended to further promote fair pay practices was reintroduced in Congress.   In addition, just last week, a federal judge lifted the stay on the changes to the Equal Employment Opportunity Commission’s (“EEOC”) EEO-1 Report.  The revised EEO-1 report would require certain employers to provide pay data by sex, race, and ethnicity to the EEOC, allowing it to more easily detect and track impermissible pay differentials.  Though at very different stages in their respective lawmaking processes, the proposed law and final regulation are very clearly intended to address pay inequality and provide additional enforcement tools.

Stay Lifted on EEO-1 Report

In August 2017, ahead of the 2018 submission deadline, the Office of Management and Budget (“OMB”) stayed collection of pay data based on race, ethnicity, and sex to allow it to review the regulation related to the lack of public opportunity to comment on the format of submission of the additional data and burden estimates related to the specific data file format provided.  However, on March 4, 2019, a Washington, D.C. federal judge ordered the stay be lifted because she determined that OMB’s decision was arbitrary and capricious – citing unexplained inconsistencies based on its prior approval of the rule and failure to adequately support its decision.  Continue reading

OMB Suspends New EEO-1 Reporting Data Requirement

Employers throughout the nation who have been preparing to comply with the revised Employer Information Report (EEO-1) will be pleased to learn that the Office of Management and Budget’s Office of Information and Regulatory Affairs (“OIRA”) has indefinitely suspended the new report’s compliance date.

By way of background, as explained hereEEOC Picture, in February 2016, the U.S. Equal Employment Opportunity Commission (“EEOC”) announced a major revision to the EEO-1 Form reporting requirements, requiring all employers with more than 100 employees (and federal contractors with more than 50 employees) to submit compensation data based on certain demographic information such as gender, race, and ethnicity to the EEOC beginning in 2017.  Following that announcement, employers in all industries voiced numerous concerns about those changes, including the increased time and money that would be required to complete the new report, confidentiality issues, data security and privacy issues, the range of false positives that would result from the submission of pay data, and the enforcement actions that would inevitably arise from these false positives.  Although the EEOC thereafter issued a “revised” Final Rule in September 2016, the revised rule changed very little from the original, aside from moving the due date for submission to March 31, 2018.

However, on August 29, 2017, the OIRA stopped the new EEO-1 rule in its tracks, stating in a memorandum to the EEOC that among other things, it is “concerned that some aspects of the revised collection of information lack practical utility, are unnecessarily burdensome, and do not adequately address privacy and confidentiality issues.”

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EEOC Issues Revised Proposal to Collect Pay Data from Employers

The U.S. Equal Employment Opportunity Commission (EEOC) has announced the publication of its revised proposal to collect pay data through the demographic-related Employer Information Report, otherwise known as the EEO-1 Report. After an initial public comment period, EEOC has proposed changes such as moving the due date for the enhanced EEO-1 Reports from Sept. 30, 2017 to March 31, 2018, to allow employers more time to change their recordkeeping and reporting. The comment period for the revised proposal will remain open until August 15, 2016.

Under existing requirements, the EEO-1 Report must be filed annually with the EEOC by private employers with 100 or more employees as well as federal contractors with 50 or more employees that meet certain eligibility requirements. Significantly, private employers with fewer than 100 employees also are subject to this reporting requirement where they operate with an affiliated business as a joint enterprise such that together the group employs 100 or more employees. The EEO-1 Report presently requires the identification of the workforce by job category, and race/ethnicity and gender.

In late January 2016, the EEOC began soliciting public comments on proposed changes to the EEO-1 Report requiring that the data collection include information on pay ranges and hours worked for employers with 100 or more employees. As reported by the EEOC, federal agencies including the EEOC and Department of Labor “would use this pay data to assess complaints of discrimination, focus agency investigations, and identify existing pay disparities that warrant further examination.” Secretary of Labor Thomas E. Perez has stated that the “data collection also gives the Labor Department a more powerful tool to do its enforcement work, to ensure that federal contractors comply with fair pay laws and to root out discrimination where it does exist.”

The revised form will require reporting of employee numbers and total hours worked according to pay bands. These pay bands are based on calendar year W-2 income, which includes base salary as well as overtime pay, bonuses and commissions. These reports are designed to show pay discrepancies by race/ethnicity and gender within specific job categories.

While it remains to be seen how federal agencies will use this pay data, it will certainly provide fodder for agencies investigating or litigating discrimination claims. In addition, although the EEOC purports to maintain these EEO-1 Reports in confidence, private litigants are expected to seek this packaged pay data from employers as statistical evidence to support race or gender discrimination claims. This pay data can quite easily be taken out of context by plaintiffs’ attorneys, and employers may find themselves in the defensive position of explaining the non-discriminatory reasons for the pay differential.