On January 29, 2016, the U.S. Equal Employment Opportunity Commission (“EEOC”) issued a proposed rule that, if finalized, will require federal contractors and other employers with more than 100 workers to include information about pay ranges and hours worked in addition to the information already included in their Equal Employment Opportunity reports ("EEO-1" reports). This obligation would be effective starting in 2017. The current EEO-1 form requires certain covered employers with more than 50 employees (government contractors) or 100 employees (private industry) to report annually on the number of individuals they employ by race, ethnicity, gender and job category.

The EEOC believes that the pay data will:

  1. Provide the EEOC and the U.S. Department of Labor’s Office of Federal Contract Compliance Programs (“OFCCP”) with more insight into pay disparities across different industries and occupations.
  2. Help the EEOC assess discrimination complaints and investigate/identify existing pay disparities.
  3. Encourage employers to self-monitor and comply voluntarily if they uncover pay inequities.

Currently, the plan is for everyone to submit their 2016 EEO-1 reports as they have in the past. Starting in 2017, government contractors subject to the EEO-1 reporting requirement (and who have between 50 and 99 employees) will still report the same information on their EEO-1 reports. But, those employers who have 100+ employees and are obligated to submit an EEO-1 report will have to provide the new pay and hours worked data. An illustration of the new data to be collected can be found here.

The revised EEO-1 report will collect aggregate W-2 data in 12 pay bands for the 10 EEO-1 job categories and the total number of hours worked by the employees included in each EEO-1 pay band cell. The EEOC believes this data will allow analysis of pay differences while considering aggregate variations in hours and that the total hours worked will permit an analysis that accounts for periods when the employees were not employed, thus reflecting part-time work. The EEOC plans to seek employer input regarding how to report hours worked for salaried employees.

The most obvious concern for employers is that the raw data to be collected will not reflect the host of legitimate factors that affect an individual’s pay, such as quality of performance, level of education and seniority. And, once the EEOC starts gathering and analyzing this newly available pay data, there will likely be an increase in pay discrimination investigations and litigation, even without a specific complaint. To address these issues, even those employers who make every effort to address pay equity will have to expend precious time explaining the reasons for any pay differential.

Should these new requirements be implemented, they will require employers to be extremely thorough with record keeping, training and understanding of the data. Affected employers may want to conduct a privileged review and/or self-audit of pay practices now to determine what their data will reflect and whether they have the processes in place to provide the required data and to explain any pay differential.

The proposed rule can be found here. Comments are encouraged and may be submitted online at www.regulations.gov until April 1, 2016.