The Equal Employment Opportunity Commission (EEOC) recently announced a proposed rule that would require larger employers to collect and report employee wage data categorized by race, ethnicity and gender. The EEOC seeks to use this data to identify pay disparities and focus its investigations of potential pay discrimination. Although the proposed rule would not become effective until mid-2017, employers should consider taking steps now to ensure they are ready for the expected mandates.
Currently employers with 100 or more employees must annually report to the EEOC, using an Employer Information Report (“EEO-1”) form, data identifying their total numbers of employees by certain job categories, race, ethnicity and gender. On January 29, 2016, the seventh anniversary of the Lilly Ledbetter Fair Pay Act, the EEOC proposed a new rule that would modify the contents of the EEO-1 form and require reporting of additional data on employee compensation. Specifically, covered employers would need to collect and report on the EEO-1 aggregate data on the numbers of their employees that fall within twelve pay bands classified by race, ethnicity and gender. Employers also would be required to report the total hours worked by their employees in each of these categories.
The pay data to be submitted under the proposed rule would need to be collected from earnings reported on employee W-2 statements. The rule would mandate that employers select a date between July 1 and September 30 of the reporting year, and then report the required wage data using W-2 earnings for the twelve-month period preceding that date.
In announcing the rule, EEOC Chair Jenny R. Yang remarked that the agency has identified equal pay as one of its “top national priorities.” The agency’s stated goals in collecting this data are to analyze pay differentials and assess discrimination complaints, focus its investigations and identify employers with questionable pay practices. The EEOC stated that it plans to develop statistical software tools to analyze the data collected from the new EEO-1 forms. Notably, however, the EEOC has yet to articulate how it will analyze this data. The agency has not disclosed what methodology or criteria will be applied.
The proposed rule raises several legitimate issues of concern for employers. First, the new reporting mandates are likely to impose additional administrative burdens. Companies may require additional staff and software enhancements to collect and formulate the necessary data.
Second, employers will be subjected to heightened scrutiny of their pay practices, and will face greater risks of exposure to investigation and/or enforcement action by the EEOC or other agencies. Finally, the disclosure of vast quantities of wage data to the EEOC raises confidentiality issues that have not been addressed by the agency.
The EEOC has initiated a 60-day period for public comment on the proposed rule, which will end on April 1, 2016. A public hearing is also planned though a date has not yet been set. If the proposed rule is adopted, covered employers will need to submit the new EEO-1 data by September 30, 2017.
The EEOC’s proposed rule reflects a larger trend of increased focus by the federal and state governments to address equal pay issues. Over twenty states have either enacted or introduced legislation aimed at combating gender pay discrimination. As we previously reported, California recently enacted a Fair Pay Act that strengthened its existing equal pay law by narrowing the defenses available to explain pay disparities between male and female employees. In New York, Governor Cuomo recently signed comprehensive amendments to eight laws comprising the Women’s Equality Act. Similar to the California statute, this legislation tightens an exception to the state’s prohibition against gender-based pay differentials, prohibits employer restrictions on employee discussions about wages, and increases damages available for violations of the law.
In anticipation of the new EEO-1 reporting requirements, employers should consider taking these steps now:
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