Diversity & Inclusion

EEOC’s controversial EEO-1 change would root out pay discrimination

by Amanda Shelby

On January 29, 2016, the Equal Employment Opportunity Commission (EEOC), the federal agency charged with administering and enforcing the civil rights laws that prohibit workplace discrimination, proposed a significant revision to its Employer Information Report (also known as the EEO-1). The federal government uses the EEO-1 to collect demographic data about an employer’s workforce. The EEOC’s proposed amendment to the EEO-1 would require employers with 100 or more employees to report pay data in addition to their workforce demographics. So what’s the purpose of the proposed change, and how will it impact you?  Pay Discrimination

EEOC’s proposed EEO-1 changes

The current EEO-1 requires certain employers to report to the federal government demographic data about their workforce, including employees’ race, ethnicity, sex, and job category. The proposed revision to the EEO-1 would require employers with 100 or more employees to also report aggregate data on employees’ pay range and hours worked beginning with the 2017 EEO-1 report.

For purposes of reporting pay data, employers would not be required to list specific salaries of individual employees. Rather, the EEOC has proposed using aggregate W-2 data in 12 pay bands for the 10 current EEO-1 job categories: “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 3 African[-]American women as professionals in the highest pay band.” The EEOC believes this method for collecting and reporting pay data not only will be more likely than others to generate reliable data but also will be less burdensome for employers than other possible alternatives.

The EEOC’s proposal for collecting and reporting hours worked, particularly the hours worked by salaried employees, is less clear. Many employers don’t track salaried employees’ hours. The EEOC hasn’t said it will require employers to begin collecting that data, but it believes that companies likely have access to employees’ “total number of hours worked,” and collecting and reporting that data would only “impose a minimal burden.”

If this change sounds familiar, it’s because the EEOC’s proposed rule is similar to—and replaces—a rule proposed by the U.S. Department of Labor (DOL) that would have required federal contractors to submit comparable pay information in their annual equal pay reports to the Office of Federal Contract Compliance Programs (OFCCP).

Potential impact of proposed changes

The EEOC’s purported goal of revising the EEO-1 to include pay data is twofold:

  1. To “assist the agency in identifying possible pay discrimination”; and
  2. To “assist employers in promoting equal pay in their workplaces.”

The proposed rule makes it clear that the EEOC has already begun thinking about the first goal. In its proposal, the agency disclosed that it will use statistical tests as a starting point for analyzing the W-2 data employers report on EEO-1s. It added that it intends to develop, along with the OFCCP, a software tool to help investigators analyze pay data and compare the information across industries and geographic areas.

Regardless of the sophistication of the federal government’s statistical analysis and software developments, the EEO-1 omits valuable information that may be relevant to any pay disparity the EEOC or the OFCCP identifies. For example, the proposed EEO-1 will not request information about employees’ seniority with the company, years of experience in the field, past performance ratings, production levels, or other bona fide job-related factors important to determining pay.

Assuming the proposed rule becomes final, employers with 100 or more workers can expect employees, the EEOC, and the OFCCP to be more willing than ever to file charges alleging discriminatory pay practices. Employers should also expect to spend a pretty penny defending these claims, many of which could involve class claims of systemic discrimination. Even an individual claim could be costly, though, because it will require the employer to justify not only the employee’s pay but also the pay of all of her comparators.

Bottom line

For now, the EEOC’s proposed revision to the EEO-1 is just that—a proposal. Employers, interest groups, and other members of the public are invited to provide written comments on the rule by April 1, 2016. A public hearing will follow.

If the rule is adopted, employers with 100 or more employees will have to complete and submit the updated EEO-1 in 2017, disclosing the required pay data and hours worked for employees. Employers with fewer than 100 employees that must complete and submit an EEO-1 will not be affected but will continue to file the current EEO-1.

ShelbyIf you anticipate that your company will be subject to the rule, consider asking your employment law counsel to review your pay practices and evaluate your risk before you’re forced to disclose your employees’ pay data next year.

 

Amanda Shelby is an employment law attorney with Faegre Baker Daniels LLP in Indianapolis, Indiana. She may be contacted at amanda.shelby@FaegreBD.com.