File this under “Be careful what you wish for.”
The National Academies of Sciences, Engineering, and Medicine released its long-awaited report evaluating the EEOC’s pay data collection tool. The Equal Employment Opportunity Commission commissioned this study in 2020 and requested the NAS to examine the quality of compensation data submitted by employers for the reporting years of 2017 and 2018 and to provide recommendations to guide future pay data collections.
My colleague Robin Shea already covered the announcement, including statements by two of the three Republican members of the Commission, so I will jump straight to recommendations of the NAS panel, focusing on the suggestions that could affect employers most. For brevity and ease of reading, I have summarized the relevant recommendations, so the wording is mine except where quotation marks are used.
- Combine Component 1 (the non-pay employee demographics traditionally submitted by employers) and Component 2 (the pay data) into a single data-collection instrument, which would be less burdensome for employers and reduce errors.
- Eliminate Type 6 reports (the reporting option for establishments with fewer than 50 employees that does not require employee demographic information). Note that the EEOC did not allow Type 6 reports for the 2021 Component 1 data submission.
- Eliminate consolidated reports to simplify reporting and reduce the burden on employers.
- Perform field tests before implementing additional pay data collections “to investigate the issues of burden, data availability, and questionnaire design.” The testing “should examine the sources of errors in the hours-worked and employee count data, and should assess the functioning of the new survey questions.”
- Require employers to use the same reporting period for Component 1 and Component 2 filings “to improve comparability of data and reduce [employer] burden.”
- Provide a method for employers to download and review responses before submission of pay data as is currently provided with Component 1.
- Collect W-2 Box 5 wage data instead of Box 1 because that would provide a more accurate view of employees’ total compensation.
- Narrow the pay bands provided for reporting, especially for high earners, to capture more useful information and variations in pay.
- Better yet! Eliminate the broad collection of aggregate data altogether and gather employee-specific information instead.
- Eliminate the use of current EEO-1 job categories because they are not “sufficiently detailed for analysis of similarly situated employees.” Instead, the EEOC should use the Standard Occupational Classification system (census codes) or find another method for coding individual-level job titles.
- Develop a process for measuring employees’ sex, gender identity, and sexual orientation “in a manner appropriate for EEOC data collections.”
- Distinguish between exempt and non-exempt employees and remove the collection of hours for exempt workers.
- Account for partial-year employment by measuring the number of weeks worked during the reporting year.
- Consider expanding the report to include data on other protected groups, such as individuals with a disability, veterans, and employees age 40 and older.
- Explore ways to collect additional information relevant to compensation, such as education, experience, and tenure.
The recommendation to require submission of employee-level detail may be the most significant of the NAS suggestions. According to the NAS panel, individual data on employees would be easier for employers to submit, and the existing method of aggregating employee data by EEO-1 category and pay bands “severely limits the utility of the data collected, unnecessarily increases employer burden, and complicates the collection of additional key information.”
Regardless of any governmental assurances of security and confidentiality (which would undoubtedly be made), the prospect of requiring virtually every employer in the country to submit detailed information on each of its employees and the potential for access and use by nefarious actors is beyond alarming. In addition to concerns about security, the level of burden associated with a requirement to disclose, on an individual employee basis, detailed information about things such as education and experience, would be astronomical.
If the NAS recommendations are adopted, employers might be required to submit at least the following information for each employee in their workforce:
- Gender identity
- Sexual orientation
- Age or date of birth
- Disability status
- Veteran status
- Job title or some type of occupational code
- FLSA exemption status
- Number of weeks worked during the year
- Box 5 wages from annual W-2 form
- Total hours worked for non-exempt employees
- Corporate entity (employer)
. . . and the NAS repeatedly addressed the importance of reducing the burden on employers.
In response to the report, Republican Commissioner Andrea Lucas said:
Before the EEOC gambles on a potentially billion-dollar burden on our nation’s private employers and incentivizes the intrusive collection of sensitive information from employees, at a minimum the agency must undertake a formal notice and comment rulemaking and a public hearing to ensure robust public comment and input.
Employers should be alert for future announcements from the EEOC, especially any formal notice and comment or pilot testing of potential reports, and be prepared to provide constructive and detailed information regarding various concerns raised by future pay data reporting.