On March 16, 2016 the EEOC will be holding hearings on its proposal  to expand the EEO-1 report to require employers to provide pay data. Orrick’s Gary Siniscalco was asked to address the hearing to provide employer views on this issue. Watch our Blog for ongoing developments on this issue and  new developments in the equal pay area as they continue to unfold. The text of Gary’s testimony before the EEOC will be as follows:

Thank you for the invitation to appear before the Commission to offer comments and answer the Commission’s questions in connection with the Commission’s proposed revision to the EEO-1 report.

No one should disagree with the proposition that pay equality, i.e. paying workers equally where they do the same work, is not only legally required, but is a societal mandate. The primary question asked by the applicable laws, including the Equal Pay Act of 1963 (EPA) and Title VII of the Civil Rights Act of 1964 (Title VII), is whether the work performed is equal (EPA standard) or similar (Title VII) in terms of skill, effort and responsibility and when performed under similar working conditions.

Applying the framework above, the issue of “pay equality” arises only where the work is “equal”, or substantially similar.  And, only in such circumstances do employers have the burden of explaining or justifying pay differences.

In 2010, at President Obama’s direction and insistence, the present Administration established a National Equal Pay Enforcement Task Force.  EEOC and OFCCP were the primary agencies tasked with attacking the perceived problem of unlawful pay by employers. Each agency had a respective mandate to investigate covered employers and covered government contractors.

In a 2014 article published by the ABA Journal of Labor and Employment Law, my colleagues and I addressed issues and concepts of equal pay, as well as the pay gap.  Gary Siniscalco, Lauri Damrell & Clara Nabity, The Pay Gap, the Glass Ceiling, and Pay Bias: Moving Forward Fifty Years After the Equal Pay Act, 29 ABA L. & Emp. L. J. 395 (2014).  We explain how and why ensuring “pay equality” (meaning equal pay for equal work) is very different from the concept of closing the “pay gap.” We also cite to many authoritative studies by independent agencies describing the myriad factors other than possible employer bias that contribute to the pay gap.  Id. at 404-414.

The Commission’s focus, of course, is on “pay equality” and addressing pay bias under the EPA and Title VII.  It also is focused on the pay gap in the sense that job discrimination (e.g., hiring, channeling, segregation, promotion, etc.) can affect pay.  But such practices affecting pay are not the same as denials of equal pay when workers are in fact in the same job and do the same work.

Accordingly, we reported results of the task force’s equal pay enforcement activities as described in a 2013 White House report describing the respective agencies’ efforts and findings of bias. See Siniscalco, Damrell and Nabity at 401-404.  With respect to OFCCP, the White House acknowledged that since start of the task force in 2010, OFCCP conducted 14,000 contractor audits.  Yet of those 14,000 audits, less than 90 resulted in findings of pay bias.  Id. at 403-404.  And, while I have not seen published data, I understand that going back to 2009 through FY 2015, OFCCP has conducted approximately 27,000 audits and found approximately 100 instances of pay bias. The White House report similarly acknowledges that EEOC has found little evidence of equal pay bias.  I do know from my own experience representing employers faced with EEOC directed investigations, that no pay bias was found for employees performing equal work.  Indeed, OFCCP itself has recognized that when looking at the differentials related to pay differences, “such general information about pay differentials among men and women includes pay differentials that may not be attributed to discrimination.”  Preamble to OFCCP Pay Secrecy rulemaking: Department of Labor Prohibition Against Pay Secrecy Policies and Actions, 80 Fed. Reg. 54939 (Sept. 11, 2015).

Therefore, despite all the rhetoric and assertions of existing, pervasive pay bias for equal work, this Administration’s aggressive enforcement program has failed to show any such pattern of employer bias. Indeed, the overwhelming conclusion from thousands of OFCCP audits, applying Title VII standards, is that no evidence exists to suggest pervasive employer discrimination with regard to workers in similarly situated jobs.

Purportedly, the proposal to expand the EEO-1 report and require employers to provide pay data is intended to allow EEOC to use this data during the investigation of charges.  Yet the proposed data compilation will be far more summary and vague than the data OFCCP has long requested in audits.  Moreover, the broad nature of jobs encompassed in EEO -1 categories will allow no meaningful look at pay of workers who are in any way similarly situated in their skill, effort, and responsibility.  The importance of looking beyond broad labels when identifying who is “substantially equal” or “similarly situated” was exemplified in the EEOC’s recent case against the New York Port Authority for allegedly discriminating against its female attorneys in compensation.  As the court held, not all attorneys are the same, and pay disparities between attorneys may be justified based on the variations in the work they do.  EEOC cannot make meaningful comparisons between employees based on expansive EEO-1 categories that only loosely tie together job positions with vastly different characteristics.  False positives will be abundant, and investigating them will absorb valuable EEOC and employer resources that should instead be spent on more targeted and meaningful efforts.

The proposal to use W-2 income data is also potentially flawed because of the way certain types of compensation are (and are not) reported on the W-2.  Consider, for example, stock option compensation, which does not appear on a W-2 until the employee chooses to exercise his or her options.   Thus, the value reported is not within the control of a company.  Employees can wait years to exercise their options or exercise annually, they could pick a day when the stock price is high or hit the nadir.  The only proper way to measure option compensation is at the time of grant.  This may most easily be done by simply looking at the number of shares granted at hire or in an annual round of grants.  There are also methods of quantifying option grants, such as the Black Scholes model.  Here is an overly simple example of why it is inaccurate to use W-2 income when evaluating pay of employees who are compensated with stock options:

Option characteristics:

  • Grant date: 1/1/15
  • Grant price: $10
  • Expiration date: 1/1/25 (at which point stock has raised to $30)
  • Shares: 10,000
  • Vesting: 4 years

Jane Doe is frugal and exercises all of her options in 2025 and market high, so in 2025 her W-2 reports $200,000 in options income.

John Smith needs to pay college tuition and exercises immediately and annually, so his W-2 reports $25,000 in additional income in 2016, 2017, 2018 and 2019.

I expect others will better address the burden to compile and stratify the W-2 data, the unfeasibility of determining hours worked of exempt workers, and how W-2 data contains non-comparable information on total pay.  Others will also address the competitor and personal privacy disclosure risks.

Given the significant impact of compilation, disclosure risks, and apparent lack of relevance to assessing equal pay for equal work, one might ask what EEOC has done to assess the predictive value, if any, of the data it proposes to collect. I would urge EEOC to consider carefully the impact on employers relative to the Commission’s legitimate legal need, determine clearly whether and how the data will offer a useful predictor and be probative of pay bias, and whether there is a reasonable and relevant alternative with a lesser impact.

In assessing whether such EEO-1 data might be useful, consider the well-publicized data for just one establishment at one location; namely the President’s own White House staff and the reported pay gap between men and women. There, as with other employers, the existence of a pay gap offers no evidence to assess whether equal pay bias exists among the President’s staff.

In sum, I urge the Commission to not pursue a burdensome obligation with little predictive or probative value, without first looking at reasonable alternatives with lesser impact.

Finally, while it is beyond the scope of the Commission’s EEO-1 proposal, and this hearing, I urge the Commission to study and hold hearings with stakeholders who have various different perspectives and areas of expertise, including government, the private sector, employee and management attorneys, academics, and other subject matter experts on the persistence of the wage gap and the possible causes that effect equal employment opportunity.

For example, the Commission might consider the following:

  • Examine federal job training programs and the billions of dollars spent by the Department of Labor.  Consider why a disproportionate percentage of women choose, or are pushed, into job training for lower paying occupations. See Siniscalco, Damrell & Nabity, supra, P. 426 and analysis by the Institute for Women’s Policy Research (IWPR) cited in our Article, FN. 223.
  • Examine why high school level girls and students of color choose, or are pushed into educational programs leading to lower paying occupations, or are discouraged from going into the currently high value STEM educational programs.
  • Conduct further analysis as to why the investigative and enforcement tools that have been at the disposal of the administration for the last 7 years are not working.