Executive Summary: On May 3, 2019, the U.S. Equal Employment Opportunity Commission (EEOC) confirmed that employers will be required to submit Component 2 pay data for years 2017 and 2018 to the EEOC by September 30, 2019. The announcement came on the heels of an April 25, 2019, judicial order mandating that employers submit Component 2 data for year 2018 by the same September 30, 2019, deadline, and requiring the EEOC to designate an additional year (either 2017 or 2019) for data collection. Then, hours after confirming that the 2017 data would be collected, the Department of Justice filed a notice of appeal of the March 4, 2019, and April 25, 2019, judicial orders to the United States Court of Appeals for the District of Columbia Circuit.
Background: As previously reported, the EEOC’s revised pay data reporting requirements were reinstated by the United States District Court for the District of Columbia on March 4, 2019, following a decision issued by the district court that effectively lifted a stay on the requirements, National Women’s Law Center, v. Office of Management and Budget, Civil Action No. 17-cv-2458 (D.D.C. 2019). The revised pay data reporting requirements involve a significant expansion of employers’ EEO-1-related obligations. Specifically, the expanded reporting requirements mandate that employers with 100 or more employees, and federal contractors with 50 or more employees, report W-2 wage data and hours worked broken down by gender, race, and ethnicity within 10 defined job classifications, and within 12 pay bands. This “Component 2” data is in addition to employers’ existing obligations to report Component 1 data, which breaks down the number of workers employed with the company based on gender, race, and ethnicity. Employers were already required to submit Component 1 data by May 31, 2019. However, the timeframe for submitting the new Component 2 data was unclear, and for several weeks following the district court’s ruling, employers were without further guidance as to when they would be required to submit such data.
EEOC Proposes Deadline but Warns of Data Collection Issues: On April 3, 2019, in a filing with the district court that lifted the stay, the EEOC explained that it would be unable to collect Component 2 data by the May 31, 2019, filing deadline, but explored the possibility of a September 30, 2019, deadline. The EEOC acknowledged the “significant practical challenges” of collecting Component 2 data. The EEOC submitted an affidavit in support of its filing from its Chief Data Officer, in which he explained that the revamping of the agency’s website to allow for collection of Component 2 data by September 30, 2019, would require enlisting the help of a third-party consulting firm at a price tag of $3 million. The Chief Data Officer further explained in his affidavit that significant data integrity issues inherent in collecting the Component 2 pay data under such a short time schedule would render the information essentially unreliable. Several employer groups also filed amicus briefs articulating the impracticalities of filing Component 2 data this year.
Final Ruling Issued: On April 25, 2019, after considering comments submitted by the EEOC, plaintiffs, and other interested parties, the district court issued its final ruling from the bench, requiring employers to collect two years of Component 2 data by the EEOC’s proposed deadline of September 30, 2019. The court identified 2018 as one of the two years required for data collection, and gave the EEOC the option of selecting either 2017 or 2019 as the second year for data collection. In its oral ruling, the court chided the EEOC for not having a plan in place for the collection of Component 2 data, stating “[t]he government does not have clean hands in this case.” On May 3, 2019, the EEOC first announced that 2017 would be the second year selected for Component 2 data collection, and then the DOJ promptly filed its appeal of the district court’s two orders mandating collection of the Component 2 data in 2019.
Required Component 2 Data and Steps for Submitting Data:
The EEOC anticipates that it will begin collecting Component 2 data in mid-July 2019, and will notify employers when the survey that will be used to submit their Component 2 data is officially open. The EEOC’s website now includes a reference to the May 3, 2019, appeal and states “[t]he filing of this Notice of Appeal does not stay the district court orders or alter EEO-1 filers’ obligations to submit Component 2 data. EEO-1 filers should begin preparing to submit Component 2 data.” The data requirements and process that employers will follow when submitting Component 2 data are outlined briefly below:
Step 1: Snapshot – The “snapshot” period is October 1 through December 31 of the reporting year. Employers must select a single pay period that falls within this timeframe; employees active during the selected payroll period make up the “snapshot.”
Step 2: Pay Bands – Employees are placed into one of the 12 EEO-1-designated pay bands using the pay data captured from W-2 earnings in Box 1 (Wages, Tips, and Other Compensation.)
Step 3: Total Hours Worked – Employers must report the total number of hours worked by both exempt and non-exempt employees for each EEO-1 category and pay band for each race/ethnicity and sex combination.
Step 4: File Upload – To complete the process, employers will upload the file, now containing 27,934 characters per establishment (previously 1,319 characters), to the EEOC.
Employers can expect additional detail and instructions from the EEOC later this summer.
The Bottom Line: Employers are advised to submit their Component 1 data to the EEOC by the May 31, 2019, filing deadline, and to begin preparing Component 2 data for submission to the EEOC in advance of the September 30, 2019, deadline in the event the EEOC does, in fact, move forward with the data collection. As reported above, the new data collection greatly increases the complexity of employers’ reporting requirements, and employers should plan accordingly in terms of time and resources. We will continue to provide updates on the EEOC’s pending appeal.