On February 1, 2016, the EEOC made public a proposed revision to the Employer Information Report (“EEO-1”) to include collecting pay data from employers, including federal contractors, with more than 100 employees. According the EEOC, the collection of this pay and hours data will help in “identifying possible pay discrimination and assist employers in promoting equal pay in their workplaces.” The EEOC says that this pay data will be used “to assess complaints of discrimination, focus EEOC investigations and identify existing pay disparities that may warrant further examination.”

The EEOC also issued a fact sheet for small employers and a question and answers document addressing the proposed changes. There is a 60-day comment period where interested parties can weigh in on the proposal.

EEO-1 data is already being collected from employers each September. This data provides the federal government with workforce profiles from private sector employers by race, ethnicity, sex and job category. This proposal would add aggregate data on pay ranges and hours worked to the information already being collected. If adopted, the new pay and hours requirements would become effective in September 2017.

The Details of the Proposal

Pay Bands. The data will be collected using W-2 data in 12 pay bands in each of the 10 EEO-1 job categories looking back 12 months from July each year. According to the EEOC’s proposal, employers will simply count and report the number of employees in each pay band. For example, a filer will report on the EEO-1 that it employs three African American women as professionals in the highest pay band. The 12 pay bands are as follows:

Click here to view table.

Hours Worked.  The EEO-1 will also collect the total number of hours worked by the employees included in each EEO-1 pay band cell. This data will allow analysis of pay differences while considering aggregate variations in hours.

The Devil in the Details

Even before the 60-day comment period ends, employers and employer groups have already raised a number of issues with the EEOC’s proposal. Among them are:

  • Burdensome. Issues with compatibility of payroll systems will abound, tracking W-2 information from July and not on a calendar year basis. New payroll software may have to be developed. More time and expense to gather and report the data will be expected.
  • Apples and Oranges. The proposed 12 pay bands don’t take into account variations of actual job functions, length of service, time off, performance and disciplinary variables.
  • Confidentiality. Although the EEOC assures that the pay data will be confidential and the collection of the data will not reflect earnings of individual employees, it does not appear that sufficient confidentiality safe guards are in place now, nor will they likely be when the rule takes effect.
  • Relevance. The EEOC’s methods may be ignoring the statistical significance of the data collected because there is no way to compare similarly situated employees in a meaningful way.
  • Litigation. Any apparent pay disparity will likely be a tip-off to the EEOC to dig further in finding an unlawful pay disparity. Indeed, plaintiffs’ attorneys may use the gross pay band data to initiate class actions when a deeper dive into the data may likely reveal no unlawful pay discrimination. Employers then will likely have to defend allegations using expensive statistical experts.

The bottom line for employers is that the collection of pay and hours data for the government investigators is in your future.

References: EEOC Federal Register Notice (February 1, 2016); EEOC Fact Sheet for Small Business; EEOC Questions and Answers.