If there was any doubt that pay inequality is a major risk area for employers, that doubt should be erased. The proposed revision to the Employer Information Report (EEO-1) will require private employers, including federal contractors, with 100 or more employees to report pay ranges and hours worked in addition to the traditional data collected beginning in 2017. This will allow the EEOC and the OFCCP to target compensation issues and address pay inconsistencies. Ogletree Deakins, Cheryl L. Schreck, shares the breaking news.
On January 29, 2016, the U. S. Equal Employment Opportunity Commission (EEOC) announced a proposed revision to the Employer Information Report (EEO-1) that will require private employers, including federal contractors, with 100 or more employees to report pay data by sex, race, and ethnicity as well as job category. According to the EEOC, the new data that employers will be required to provide will enable the agency to identify possible pay discrimination and assist employers in promoting equal pay in their workplaces.
The New Requirements
EEO-1 data traditionally has provided the federal government with information from private sector employers regarding the racial, ethnic, and sex makeup of their workforces, including information regarding job categories. The proposal to revise the current EEO-1 report will require employers to also provide data on pay ranges and hours worked by their employees. With this new data, the EEOC plans to compile and publish aggregated data that it contends will help employers in conducting their own analysis of their pay practices to facilitate voluntary compliance. The EEOC reports that agencies will use this pay data to “assess complaints of discrimination, focus agency investigations, and identify existing pay disparities that may warrant further examination.”
Currently, the EEO-1 requires certain federal contractors with 50 to 99 employees and other private employees with 100 or more employees to report annually, by September 30, the number of individuals they employ by job category, race, ethnicity, and sex. The EEOC proposes that for the 2016 EEO-1 reporting cycle, “to ease the transition to the new pay data collection in 2017,” employers that are currently required to report will continue to report data on race, ethnicity, and sex by job category on the EEO-1. Starting in 2017 (by September 30), employers, including federal contractors, with 100 or more employees will begin to report data concerning employees’ pay and hours worked.
For each of the EEO-1 job categories, the proposed new EEO-1 will contain 12 pay bands. On the proposed EEO-1, employers will be required to tabulate and report the number of employees whose W-2 earnings for the prior 12-month period fell within each pay band by job category.
- For example, an employer will be required to report on the EEO-1 that it employs 20 Hispanic women who are Craft Workers in the third pay band of $24,440-$30,679.
The proposed EEO-1 will use aggregate pay for a 12-month period looking back from a pay period between July 1 and September 30 of the reporting year, as selected by the employer.
- For example, the employer may use aggregated W-2 data for the 12 months looking back from the second pay period in July of the reporting year.
The EEOC selected total W-2 earnings as the measure of pay for the new pay data reporting requirement. The EEOC maintains that it chose this measurement in order to maximize the utility of the EEO-1 pay data while minimizing the burden on employers to collect and report it. The EEOC reports that its goal was to identify a measure of compensation that encompasses as much employer-paid income earned by individuals as possible (e.g., W-2 gross income includes wages, salaries, bonuses, overtime pay, shift differentials, fees, commissions, tips, taxable fringe benefits, and elective deferrals), while at the same time finding a measure that was well-defined and compatible with data points in employers’ existing human resources and pay systems.
In addition to pay data, on the proposed EEO-1, employers will be required to report hours-worked data.
- For example, for each pay band on the proposed EEO-1, employers will be required to report the total number of hours worked by employees counted in that pay band for the previous 12 month period, by their ethnicity, race, and sex.
- For example, an employer will be required to report on the EEO-1 that total hours worked for the 20 Hispanic women who are Craft Workers in the third pay band ($19,240-$24,439) is 25,000 hours.
The EEOC believes that reporting the data in this manner will allow analysis of pay differences while considering aggregate variations in hours. Reporting total hours worked, according to the EEOC, will also permit an analysis that accounts for periods when employees were not employed, thus reflecting part-time work.
Hours Worked of Salaried Employees
At this point in time, the EEOC has not yet determined how employers will report hours worked for salaried employees. The EEOC is seeking employer input with respect to how to report such hours for salaried employees. The EEOC noted that one approach would be for employers to use an estimate of 40 hours per week for full-time salaried workers. The EEOC stated that it is not proposing to require an employer to begin collecting additional data on actual hours worked for salaried employees, to the extent that the employer does not currently maintain such information. The EEOC has invited employers to comment on this particular issue.
Confidentiality of Pay Data
The EEOC and Office of Federal Contract Compliance Programs (OFCCP) of the Department of Labor claim that they will continue to protect and maintain the confidentiality of the pay data reported by employers. They maintain that by using pay bands and collecting aggregated data, the proposed EEO-1 will protect an individual employee’s privacy. Title VII specifically prohibits the EEOC or any EEOC officer or employee from making public any information, including EEO-1 data, before a Title VII proceeding is initiated that involves that particular information.
Finally, beginning in 2017, all filers will be required to submit the proposed EEO-1 report electronically. EEO-1 filers may seek an exemption from this electronic requirement by using the existing EEO-1 process for seeking special reporting procedures.
The EEOC has published on its website the proposed EEO-1 form. Members of the public have 60 days (i.e., until April 1, 2016) within which to submit their comments regarding the proposed changes to the EEO-1 report. The EEOC has also published on its website a “Questions and Answers” document regarding the proposed changes to the EEO-1 reporting requirements with respect to pay and hours-worked data from certain employers.
Shortly after taking office, President Obama addressed pay inequality in the United States by signing into law the Lilly Ledbetter Equal Pay Act. The proposed changes to the traditional reporting requirements for the EEO-1 reflect President Obama’s continued focus on combatting pay disparities based on race, ethnicity and sex. With access to this new data, we expect that the EEOC will increase enforcement in this area, which should be a clear signal to all employers that they should carefully review and analyze their current pay practices to ensure they are able to defend against any claims of pay inequality.