The United States Equal Employment Opportunity Commission (EEOC) just announced a proposal to require large employers to provide pay data in the EEO-1 reports submitted annually to the government. While the proposal is completely consistent with the administration’s aggressive labor and employment agenda (and, therefore, should not come as a surprise), there is significant reason for concern because the requested changes will impose new burdens on employers and will now be open for the EEOC to initiate expensive and time-consuming litigation. This could potentially lead to the EEOC making examples of certain employers regardless of the reasons behind any actual pay disparities.

The proposed rule would require most federal contractors, and those that employ more than 100 workers, to add data on pay ranges and hours worked to the demographic information already provided in EEO-1 reports. This proposal, announced on the seventh anniversary of the Lilly Ledbetter Fair Pay Act, is designed to provide the EEOC and the Office of Federal Contract Compliance Programs with more ammunition to pursue one of their key initiatives — alleged systemic gender pay discrimination. The EEOC is also hoping that the new data-gathering requirement will spur employers to voluntarily analyze and address pay disparities. The public will have until April 1, 2016, to submit comments on the proposed guidelines and, as currently proposed, employers would be required to provide this information in their September 2017 EEO-1 reports. Meanwhile, the EEOC has made available a Fact Sheet for Small Business and a Question and Answer document.

If the EEOC’s proposed rule becomes effective, it will likely create several concerns for employers.

  1. The change will add substantially to the cost and administrative burden already imposed by annually submitting the EEO-1 form.
  2. Given the growing frequency of data breaches, employers may be legitimately concerned that very sensitive and competitively useful compensation information will be disclosed inadvertently.
  3. The availability of the data will make it easier for the EEOC to initiate systemic pay lawsuits that will result in negative publicity. Additionally, as legitimate reasons for a statistical disparity may not be apparent from the raw EEO-1 numbers, the EEOC may target certain employers without justification.

The fear of EEOC litigation running amok should be tempered when one considers that systemic discrimination and gender pay disparity have been a focused initiative of the EEOC for years; but, perhaps as a result of a lack of resources, the number of these cases has been less than expected. However, perhaps the availability of such data will save the EEOC some of the time, resources, and monies currently used to preliminarily investigate systemic pay practices, and allow it to pursue more of these claims.

As these proposed new rules certainly will heighten the risks of gender (and other protected class) pay disparity cases, and as large employers will be required to invest the resources to compile this information, employers should strongly consider engaging in an attorney-client privileged audit of their pay practices. They can then address any potential problems before the government comes calling.