EEOC Seeks Compensation Data to Address Pay Equity

2月 3, 2016


Summary

On February 1, 2016, the Equal Employment Opportunity Commission (“EEOC”) issued a notice to amend the EEO-1 form to require private employers and federal contractors with 100 or more employees to submit pay data to the agency by September 30, 2017. The data collection on the amended EEO-1 form will now have two data components:

  • Employees’ ethnicity, race, and sex (by job category)—data already included on the current EEO-1 form; and
  • Employees’ hours worked and total W-2 earnings, including salary, bonuses, commission, tips, taxable fringe benefits, and other forms of reportable earnings—data the agency is seeking for the first time.

The proposal, which covers approximately 61,000 employer respondents and an estimated 63 million employees, is designed to provide the EEOC and the Office of Federal Contract Compliance Programs (“OFCCP”) of the U.S. Department of Labor (“DOL”) with data to focus agency wage-discrimination investigations, assess complaints of discrimination, and discern potential pay disparities.

The proposal will be subject to a 60-day comment period on the utility and burden of collecting pay and hours data. The comment period ends April 1, 2016.

Discussion

State and Federal Equal Pay Initiatives

Under existing federal and state law, employers are prohibited from paying employees of one sex less than the opposite sex for work that requires equal skill, effort, and responsibility under similar working conditions at the same establishment.  A number of state legislatures have recently enacted new equal pay laws to expand protection and address the gender pay gaps that persist despite existing anti-discrimination laws.  For example, California’s Fair Pay Act, which went into effect on January 1, 2016, significantly strengthens California’s existing law by prohibiting gender-based pay discrimination for “substantially similar work”—instead of “equal work”—and discarding the requirement that the pay disparity at issue need occur within the same job, department, and work location to be actionable.

Through the revised EEO-1, the EEOC and DOL are seeking to strengthen and improve enforcement of laws prohibiting sex-based wage discrimination at the federal level.  The EEOC has been contemplating better wage discrimination enforcement techniques since 2010, when it commissioned the National Academy of Sciences (“NAS”) to study how best to collect pay data to support enforcement efforts.  In September 2015, the agency completed a pilot study to identify the most efficient means to collect pay data, the results of which informed its current proposal.1   The EEOC’s proposal expands on and replaces an earlier plan from the DOL to collect similar information from federal contractors.  This is a renewed effort at the federal level to address gender pay-disparity after the Paycheck Fairness Act failed to pass, and symbolically coincides with the seventh anniversary of the Lilly Ledbetter Fair Pay Act.

Current EEO-1 Data Requirements

The EEO-1 form is administered as a single data collection survey and is used to meet the statistical needs of the EEOC and the DOL.  On the current EEO-1 form, employers with 100 or more employees and federal contractors with at least 50 employees must report information on employees’ ethnicity, race, and gender in the following 10 job categories: Executive & Senior-Level Officials & Managers; First/Mid-Level Officials & Managers; Professionals; Technicians; Sales & Workers; Administrative Support Workers; Craft Workers; Operatives; Laborers & Helpers; and Service Workers.

Proposed EEO-1 Data Requirements

Beginning in 2017, the EEO-1 form will also require employers and federal contractors2 with 100 or more employees to report total W-2 earnings and hours worked for all employees by ethnicity, race, and gender in each job category on the current form.  For each of the 10 job categories, the proposed EEO-1 form would have 12 pay bands, which track those used by the Bureau of Labor Statistics in its Employment Statistics survey:

  • (1) $19,239 and under;
  • (2) $19,240–$24,439;
  • (3) $24,440–$30,679;
  • (4) $30,680–$38,999;
  • (5) $39,000–$49,919;
  • (6) $49,920–$62,919;
  • (7) $62,920–$80,079;
  • (8) $80,080–$101,919;
  • (9) $101,920–$128,959;
  • (10) $128,960–$163,799;
  • (11) $163,800–$207,999; and
  • (12) $208,000 and over.

To illustrate, an employer might report on the current EEO-1 form that it employs 10 African American women as Technicians.  On the proposed form, the employer might report that those employees fall within the seventh pay band ($62,920–$80,079).

An employer will also have to disclose the total number of hours3 worked by employees included in each EEO-1 pay band, which will help account for part-time or partial-year employment when analyzing rates of pay.  The EEOC is soliciting input during the comment period on how to report hours worked for salaried employees.

Impact on Employers

Information pulled from the amended EEO-1 may have a material impact on employers.  First, the time and cost burden on employers to compile the required information will be significant.  Second, while the agencies intend to use the pay data to inform their investigations and enforcement actions, the proposal is unclear as to how the EEOC and the OFCCP will assess the information, indicating only that they “plan to develop statistical tools that would be available to staff on their computers, to utilize the EEO-1 pay data for these purposes.”  In short, it is uncertain how the EEOC would account for differences across pay bands that may occur for legitimate reasons unrelated to gender—such as seniority, merit, level of responsibility, education or training, or quantity of production.  Other market variables include prior salaries of lateral or internal hires and individual salary negotiation skills.  Without a systemic way to account for such nondiscriminatory variables, the revised EEO-1 data could create false impressions of sex-based wage discrimination.

Another concern for employers is data privacy.  While the EEOC only publishes de-identified aggregate data derived from the form, specific EEO-1 data can be used in litigation.  And the OFCCP has stated that it will review requests for EEO-1 reports under Exemption 4 of the Freedom of Information Act and the Trade Secrets Act.

One of the apparent motivations behind the EEOC’s and OFCCP’s proposal is to focus employers on the issue of pay equity, and to encourage employers to evaluate their compensation and evaluation systems.  Self-evaluation of compensation systems will help identify potential pay disparities before they become subject to an investigation or charge of discrimination.

Conclusion

The spotlight on pay equity is not receding.  If the new EEO-1 form is approved, the EEOC will post a notice on its website and directly notify EEO-1 respondents of their duty to submit pay and hours data for the 2017 EEO-1 collection cycle.  Employers are encouraged to review employee compensation and pay practices (under the attorney-client privilege) either to resolve evident issues or to ensure that any pay disparities have nondiscriminatory explanations.  Such review might include, among other things: (i) statistical analysis of internal compensation data; (ii) examination of the employer’s evaluation program and how decisions are made for compensation adjustments; (iii) evaluation of compensation data for new hires and the decision making involved in setting compensation levels; (iv) review of the data that will eventually be provided to the EEOC and the OFCCP; and (v) sampling compensation data for specific job classifications to assess any pay disparities.

 

[1] The EEOC’s Pilot Study is available at http://www.eeoc.gov/employers/eeo1survery/pay-pilot-study.pdf.

[2] Federal contractors with 50-99 employees would not report pay data but would continue to report ethnicity, race, and gender information by job category.

[3] The revised EEO-1 form seeks the total number of hours worked—not the average number—for the employees that fall within each pay band.  An employer therefore might report that the total number of hours worked for 10 African American women employed as Technicians in the seventh pay band ($62,920–$80,079) is 10,000.

This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. Apalla Chopra, an O'Melveny partner licensed to practice law in California, Adam Karr, an O'Melveny partner licensed to practice law in California, Jeffrey Kohn, an O'Melveny partner licensed to practice law in New Jersey and New York, and Adam KohSweeney, an O'Melveny partner licensed to practice law in California and New York, contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.

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