Seeking to capitalize on President Obama’s final year in office, the Equal Employment Opportunity Commission (the “EEOC”) is proposing a new burden on employers and codifying its positions on discrimination and retaliation.
Show Me the Money: Adding Pay Data to the EEO-1
On January 29, 2016, the seventh anniversary of the Lilly Ledbetter Fair Pay Act, President Obama announced that employers with more than 100 employees will be required to add pay information to their employer information reports, known as the EEO-1. This proposed report will permit the EEOC to review racial, ethnic, and gender distinctions in pay ranges and hours worked within broad job categories. Not only will this change create an additional administrative headache for employers, but this noncontextual data necessarily presents potential liability concerns.
The EEOC is proposing that employers disclose their employees’ W-2 pay by grouping it into twelve wage bands. Currently, employers are required to complete the EEO-1 by September 30 each year using data from a twelve month period beginning in a pay period between July and September of the prior year, as selected by the employer. Even though the EEOC wants to use W-2 pay data, it does not plan to change the time frame of the collected data. Consequently, employers cannot rely on year-end W-2 amounts to create these reports, and instead will need to calculate annual W-2 data as of a date in the middle of the year.
The EEOC reasons that this additional reporting will require only a one-time programming update to an employer’s human resources information system (“HRIS”). The EEOC may well be underestimating the ease with which such a change may be implemented. Moreover, for those employers who do not have a robust HRIS, this burden may be significant. As the assembly of this information will be exceedingly arduous, covered employers should strongly consider implementing an HRIS.
As for the use of W-2 gross pay, the EEOC reasoned that it provides a view of an employee’s entire compensation, whereas salary or hourly pay rates would omit important supplemental compensation such as overtime hours and bonuses. However, such broad data, without context, offers little help in identifying discriminatory pay practices. Reporting of W-2 data alone does not explain one-off payments such as sign-on bonuses, relocation stipends, or compensation paid to substitute for equity being forfeited when a new employee leaves a former employer. It also does not capture stock options when they are granted and instead may report them when they are exercised years later.
Most important, the mere reporting of W-2 gross pay in EEO job categories does not provide context concerning differing job responsibilities, location, performance, experience, seniority, or education. It can be difficult to compare the compensation data of two employees in the same job, let alone all employees in a single EEO job category. For example, employees with managerial responsibilities are split into two categories: (1) First/Mid Level Officials and Managers and (2) Executive/Senior Level Officials and Managers. Because the Executive/Senior Level Official category of managers is limited to those employees who direct strategy for the business and are within two reporting lines of the CEO, large employers who have several reporting levels are forced to lump most of their managers into the First/Mid Level Officials category, although responsibilities and compensation of these individuals may vary greatly. Moreover, a first-level manager in a catering department might be compared to a manager of a trading desk responsible for generating revenues. Their compensation in all likelihood will be dramatically different, and the way such information is summarized and averaged on the EEO-1 may lead to an erroneous perception of discrimination.
Additionally, despite its intentions, the EEOC will not be able to determine discrepancies in the executive levels of the workforce in companies with high compensation levels. Because the top proposed wage band covers all employees who earn $208,000 or more, it may be impossible to conduct any meaningful analysis of data covering large swaths of highly compensated employees.
While the agency is required to keep all EEO-1 data confidential, the agency announced that it will develop a software tool to look at W-2 pay distribution within the individual employer and compare it to the employer’s industry or location. The EEOC will continue to publish aggregated EEO-1 data as overviews of industry and national trends, but such publication will not reveal individual employer data. More important, litigants may submit Freedom of Information Act requests for an employer’s EEO-1 report as long as the request is accompanied by a copy of a complaint against the employer alleging violations of Title VII or the Americans with Disabilities Act that is stamped “filed.”
The changes to the EEO-1 will be effective for reports due on September 30, 2017. Employers should wait for the final form to be issued, but begin planning to implement the HRIS and other changes that will be necessary to compile the required information.
The EEOC Reminds Employers of Workplace Rights for Muslim and Middle Eastern Employees
In the wake of the latest terrorist attacks and pronouncements of presidential candidates concerning Muslims in general, Americans are regularly discussing policy proposals related to Muslims and individuals of Middle Eastern descent. Consequently, the EEOC released a question and answer guide addressing issues related to employees and applicants who are, or are perceived to be, Muslim or Middle Eastern. The Q&A provides employees with specific steps for addressing potential harassment and discriminatory employment practices – many of which require employers to be mindful of their policies and practices.
Notably, the guide indicates the EEOC’s interest in hiring practices. The EEOC writes that if an applicant believes he or she was not given a job because of his or her religion or national origin, the applicant should file a charge with the EEOC in order to “get enough facts to determine whether the action was discriminatory.” Because it appears that the EEOC intends to be more focused on hiring practices, employers must be careful that their employment decisions are free from discrimination.
The remainder of the Q&A largely focuses on harassment of employees and directs employees to refer to their employer’s anti-harassment policies and procedures and notify their managers of the alleged harassment. Indeed, the EEOC even recommends that employees document incidents of harassment. It also suggests that when management becomes aware that there is tension among employees concerning these topics the employer should send out a company-wide communication reminding all employees of anti-harassment policies or conduct anti-harassment training.
Finally, via this guidance, employers are reminded that employees must be offered reasonable accommodations to observe their religious practices when such deviations from workplace policies do not pose an undue burden.
In light of the EEOC’s interest in this area, employers should review their anti-harassment policies, complaint procedures, and processes for considering reasonable accommodations to ensure they are updated. Additionally, employers should be mindful of workplace conversations that in the current climate could devolve into perceived harassment.
New Enforcement Guidance Regarding Retaliation
For the first time in eighteen years, the EEOC is seeking to update its enforcement guidance concerning retaliation, and it is pulling no punches. Since its 1998 guidance, the EEOC has seen a steady increase in retaliation charges. According to the EEOC, retaliation has been alleged in almost half of all charges it received in 2014, and since 2008 it is the most frequently asserted charge. The 76-page proposed guidance was published for public comment in January 2016 and will likely replace the 1998 guidance in the coming months.
While not binding on courts, this new guidance will be used by EEOC investigators in assessing alleged violations of anti-discrimination laws. Largely, the EEOC’s guidance summarizes Supreme Court rulings and cherry-picks its favorite circuit and district court decisions. The proposed guidance demonstrates the EEOC’s broad interpretation of the three elements of retaliation: (a) an individual engages in protected activity, (b) adverse action is taken by the employer, and (c) a causal connection between the protected activity and the adverse action exists. We highlight below some of the expansive interpretations.
The EEOC’s guidance asserts that “protected activity” consists of (a) participating in an EEO process or (b) opposing a practice. The guidance provides the following clarifications, some of which are unexpectedly expansive:
- An individual can succeed on a retaliation claim as long as he or she has a reasonable belief that he or she is engaging in protected activity, even if the individual is wrong about the existence of underlying discrimination.
- The “opposition” clause of Title VII is expansive and includes accompanying a co-worker in filing an EEO complaint.
- The agency rejects the “manager rule” created by some circuit courts, thereby protecting managers and human resources personnel from retaliation, explaining that efforts to protect against retaliation cannot be effective if “those employees best situated to call attention to and oppose an employer’s discriminatory practices are outside its protective ambit.”
- A supervisor who does not carry out management’s unlawful instructions can passively engage in protected activity.
- It might be reasonable for an individual to inform union officials, co-workers, an attorney, or even persons outside the company of their complaint and thereby engage in protected activity.
- Inquiries or discussions concerning compensation may suffice as oppositional activity if such activity could reasonably be interpreted as a complaint in opposition to discrimination.
For an adverse action to be actionable, the employer’s conduct must be materially adverse and meant to deter a reasonable person from engaging in protected activity. Similarly, the EEOC’s explanation of adverse action may catch some employers off guard, especially in light of the fact that several circuit and district courts disagree in some respects:
- The standard can be met even if the individual was not in fact deterred.
- A single incident may not be considered materially adverse, but if the employer’s conduct as a whole would deter protected activity it will be considered materially adverse.
- Actions outside the workplace may constitute adverse actions, such as disparaging comments to third parties.
- Abusive verbal or physical behavior may be an adverse action, even if it would not meet the severe and pervasive standard necessary to create a hostile work environment, but “petty slights and trivial annoyances” are not sufficient.
- Threats concerning an individual’s immigration status may be considered an adverse action.
- A manager’s request that co-workers monitor an employee’s activities constitutes an adverse action.
The guidance also warns employers not to engage in retaliation against third parties. For example, an employer is prohibited from retaliating against a complaining employee’s co-worker relative or altering a vendor contract with the employee’s family member in retaliation for the complaining employee’s protected activity. Further, the EEOC takes the position that the complaining employee’s relative (employee of the company or not) who was directly harmed by the retaliation has standing to pursue a retaliation claim against the employer.
Finally, the guidelines suggest the following best practices:
- Maintain a written, easy-to-read anti-retaliation policy that includes examples of retaliation that may not be obvious, proactive steps for avoiding retaliation, a reporting mechanism for employee’s concerns related to retaliation, and a clear explanation that retaliators can be subject to discipline, including termination.
- Train all employees regarding the anti-retaliation policy, send a message from management that retaliation will not be tolerated, and hold periodic refresher courses.
- Issue communications from senior management that the company will not tolerate retaliation.
- Tailor training to issues that have occurred in the workplace.
- Consider efforts to encourage workplace civility.
- Proactively follow up during the pendency of an EEO matter.
- Review employment actions to ensure they are non retaliatory.