On January 29, 2016, the Obama administration and the Equal Employment Opportunity Commission (EEOC) announced proposed changes to the Employer Information Report (Form EEO-1) to require payroll data from:

  1. a company with at least 100 employees in the reported payroll period, and
  2. a company affiliated through common ownership and/or centralized management with other entities in an enterprise with a total employment of 100 employees or more, and
  3. a company or any of its establishments that
    1. has 50 or more employees, and
    2. is not exempt as provided by 41CFR 60-1.5, and either
      1. is a prime government contractor or first-tier subcontractor and has a contract, subcontract or purchase order amounting to $50,000 or more, or
      2. serves as a depository of government funds in any amount or is a financial institution which is an issuing and paying agent for U.S. Savings Bonds and Savings Notes.

The proposed changes to the EEO-1 impose a duty upon these employers to report employee pay ranges and hours worked in their  EEO-1 Employer Information Reports according to various job classifications. Beginning with the September 2017 report, the Obama administration and the EEOC expect the new reporting requirement to better track the pay information of more than 63 million employees.

While the EEOC already collects information relating to the ethnic, racial and gender makeup of most employers’ workforces, this new proposal – coming exactly seven years after President Obama signed the Lilly Ledbetter Fair Pay Act into law – significantly expands the current requirements. First, the proposed rule changes would require employers to report employees’ pay data in addition to simply collecting information relating to their employees’ sex, race, ethnicity and job group. Additionally, in contrast with the president’s 2014 memorandum on pay data, which applied only to federal contractors, now all companies with 100 or more employees would be subject to this requirement.

According to the EEOC, the new pay data will provide the EEOC and the Office of Federal Contract Compliance Programs (OFCCP) of the Department of Labor with insight into any pay disparities across industries and occupations and strengthen federal efforts to combat discrimination. This pay data will allow the EEOC to compile and publish aggregated data that will help employers in conducting their own analyses of their pay practices to facilitate voluntary compliance. The agencies intend to use this pay data to assess complaints of discrimination, focus agency investigations and identify existing pay disparities that may warrant further examination.

Such a wide-sweeping rule will impact employers across the country. While the EEOC predicts that it will cost approximately $400 in the first year and $200 every year thereafter for an employer to comply with these requirements, employers should be aware of other potential challenges, including additional burdens, costs and risks associated with gathering and reporting this data. Moreover, mere compliance with the proposed rule would only be the first of several potential hurdles an employer could face. Once the actual data is collected and reported, employers may find themselves in hot water if their pay data indicates significant pay discrepancies among men and women, or other protected classes. Department of Labor Secretary Thomas Perez has touted that this new rule “will help employers to evaluate their own pay practices to prevent pay discrimination in their workplaces. The data collection also gives the Labor Department a more powerful tool to do its enforcement work … and to root out discrimination where it does exist.” Employers should consider consulting with their legal counsel to analyze their company’s pay data and be prepared to address any potential pay disparities that could lead to increased scrutiny, investigations or enforcement proceedings by the EEOC or the Department of Labor.

The EEOC published the proposed changes in the Federal Register on February 1, 2016, and the public comment period on the proposed changes will run until April 1, 2016.