Affected employers should begin data analysis now to be prepared for disclosure of pay information to the EEOC or the OFCCP in 2018.
As part of its effort to detect and remedy pay discrimination, the Equal Employment Opportunity Commission (EEOC) has revised the EEO-1 report that certain employers are required to file each year. Beginning with calendar year 2017, employers with 100 or more employees will be required to submit pay data and hours worked in the newly revised EEO-1 report. The current EEO-1 report already requires these employers to report aggregate data about employees’ sex, race and ethnicity by job category. Adding pay data to the form means that the EEOC and the Office of Federal Contract Compliance Programs (OFCCP) will now have a snapshot of employers’ pay practices across each of these protected categories.
As discussed in more detail below, even though the 2017 EEO-1 report will not be filed until March 2018, it is important that employers prepare now so that their pay data for calendar year 2017 is compliant.
Revised EEO-1 Form and Procedures
The current EEO-1 form directs federal contractors and subcontractors with 50-99 employees and private employers with 100 or more employees to submit annual reports by September 30 of each year detailing the total number of employees in each job category broken down by race, ethnicity and sex.
Beginning with the 2017 report, the EEOC has revised its procedures for collecting EEO information in three important ways. First, it has added a requirement that employers provide data on aggregate employee pay and hours worked. Second, the EEOC has moved the filing date from September 30 to March 31 of each year. Finally, the EEOC has changed the time period from which employers are to pull the required data from July 1 through September 30 to October 1 through December 31 of each year. Employers may choose any pay period during this three-month period to count their full- and part-time employees for the EEO-1 report.
The new rule applies to employers with 100 or more employees, including federal contractors and subcontractors. Federal contractors and subcontractors with 50-99 employees are not required to report data on pay and hours worked, but still will be required to report ethnicity, race and sex by job category. Non-contractor employers with 1-99 employees and federal contractors with 1-49 employees will continue to be exempt from the requirement to file an EEO-1 report.
With respect to the new requirement of submitting data on pay and hours worked, employers will be expected to report the total number of full- and part-time employees they had during that year in each of the 12 pay bands listed for each EEO-1 job category. Employers also will be expected to tally and report the number of hours worked that year by all the employees accounted for in each pay band. To identify which pay band is applicable, employers should use the pay reported for income tax purposes that year in Box 1 of the W-2 form. Employers will be expected to enter the total number of employees in each pay band by job category in the appropriate columns of the EEO-1 report based on the sex and ethnicity or race of employees.
The EEOC has addressed the effect of part-time or partial-year work on pay by requiring employers to specify the total hours worked by all the employees in each pay band. Employers should use time records to count hours worked for nonexempt employees. For exempt employees, employers have a choice of reporting 20 hours per week for each part-time employee and 40 hours per week for each full-time employee or reporting actual number of hours worked. Employers that wish to report actual hours worked will have to ensure that they have a mechanism to keep track of these hours.
What Does This Mean for Employers?
According to the EEOC, pay discrimination often goes undetected because of a lack of accurate information about what employees are paid. The EEOC and the OFCCP plan to use the pay data to understand the scope of any pay gap and focus enforcement resources on employers that are more likely to be out of compliance with federal laws.
To minimize the risk of EEOC/OFCCP scrutiny of their pay practices, employers should analyze their pay data and determine whether there are any pay disparities within job groups. Depending on the reasons for the disparities, employers should either take steps to correct them or be prepared to provide objective and legitimate reasons for the disparities. When conducting this analysis, be sure to partner with counsel to protect the analysis from disclosure to the EEOC and/or the OFCCP in an investigation. Employers also should review their existing payroll and HRIS systems to ensure that they have the technical capability to collect the data needed to meet the new requirements.
As a practical matter, employers have some time to prepare for the new requirements. Employers will not be filing an EEO-1 report at all in calendar year 2017. The 2017 report is not due until March 30, 2018. However, the 2017 report will rely on W-2 data, which covers pay for the entire year, starting with January 1, 2017. As a result, it is important for affected employers to perform the data analysis now to be prepared for the disclosure of this pay information to the EEOC or the OFCCP.