What You Should Know about EEOC's Proposal to Collect Pay Data

The Updated Proposal:

On July 14, 2016, the U.S. Equal Employment Opportunity Commission (EEOC) published its revised proposal to collect summary pay data by race, ethnicity, and sex from employers that already file the EEO-1 report (https://federalregister.gov/a/2016-16692).

• The revised proposal carefully considers the utility of the data for enforcing the nondiscrimination laws and responds to public comments that the EEOC received in response to its initial proposal published in the Federal Register on February 1, 2016 as well as testimony from the March 16, 2016 public hearing.
• Under the revised proposal, employers with 100 or more employees that already file an EEO-1 report will provide summary pay data. This data will encompass more than 63 million workers and will strengthen enforcement efforts of pay equality laws and help employers evaluate their own practices.
• The revised proposal continues to minimize the burden on employers while ensuring the pay data is useful for the EEOC and the Office of Federal Contract Compliance Programs (OFCCP) at the Department of Labor.
  • The EEOC has relied on existing systems - EEO-1 (workforce demographics), W-2 (pay), Fair Labor Standards Act (hours worked) - that employers are already comfortable utilizing.
  • In addition, in response to comments, the EEOC has proposed calendar year reporting and moved the 2017 EEO-1 reporting due date to March 31, 2018. This shift reduces costs for employers by allowing them to use W-2 wage data, already compiled for tax purposes, and provides a full 18 months for the transition to the new reporting requirements.
  • The annual added cost to report the pay data, using the revised burden estimate, is approximately $416 per employer.
• Employers provide this data through an online system. Employers enter data only in those cells of the report where they have employees. The overwhelming majority of the cells are left blank.
  • Our experience with collecting similar pay data on the EEO-4 (state and local governments) shows that on average approximately 7 percent of the cells on the reporting form are actually used by an employer to report data.

Why Collect Pay Data:

Workers depend on the EEOC to advance opportunity and freedom from workplace discrimination. Although much progress has been made in the past 50 years, pay disparities continue to be a problem in the American workplace. The EEOC sees pay discrimination in the work we do across the country. Since the creation of the President's Equal Pay Task Force in 2010, the EEOC has investigated tens of thousands of charges of pay discrimination, and through our enforcement efforts, we have obtained more than $85 million in monetary relief for those who have faced pay discrimination based on sex. Additionally, studies show that significant pay gaps exist in the U.S. workforce linked to sex, race, and ethnicity. Even when controlling for other factors, workplace discrimination is an important contributing factor to these pay gaps.

Pay discrimination has significant consequences for America's families. Eliminating the pay gap would reduce the number of working poor, improve the financial security of many families, and strengthen the nation's economy.

Robust and efficient enforcement along with voluntary efforts by employers to examine pay for potential discriminatory disparities are both critical to achieve greater compliance. Collecting pay data will enable the EEOC and OFCCP to more effectively tackle pay discrimination.

• Pay Data will Inform and Strengthen the EEOC's and OFCCP's Enforcement Efforts. The EEOC and OFCCP have long used EEO-1 data to identify trends, inform investigations, and focus resources.
• Additional Data is Necessary to Help Close the Pay Gap: The collection of summary pay data will provide valuable insight into trends and other dimensions of the pay gap across industries and occupations. The EEOC will periodically publish reports on pay disparities by sex, race, ethnicity, industry, and occupation to provide comparative data.
• Support Employer Efforts to Self-Assess Compensation Practices: The comparative data provided in periodic EEOC reports will help employers better evaluate their pay policies and practices and ensure that they are in compliance with relevant state and federal laws.

Further Detail:

Who Would Be Required to Report Pay Data?

The proposal would require employers with 100 or more employees to report aggregate W-2 income by sex, race, ethnicity, and job group.

What Information Would Employers be Required to Report?

• Employers would report summary W-2 income by sex, race, ethnicity, and job group:
  • Employers would tally the number of employees in 12 pay bands for each EEO-1 job category.
  • For each pay band, employers would enter the number of employees whose W-2 pay for the calendar year falls in that band.
  • Employers would report summary pay data. Employers would not report individual pay or salaries.
• By utilizing the same wage information employers file for tax purposes, the EEOC is defining pay consistent with existing W-2 pay practices.

Hours Worked: To account for part-time and partial-year employment, employers would report hours worked.

• The EEOC is using Fair Labor Standards Act (FLSA) categories for exempt and non-exempt workers, with which employers are familiar.
  • For FLSA nonexempt workers, employers would report the hours worked as recorded for FLSA purposes.
  • For FLSA-exempt workers, employers would have a choice: they may opt to report: (1) 40 hours per week for full-time workers, and 20 hours per week for part-time workers, multiplied by the number of weeks employed that year; or (2) actual hours-worked data that they already keep. Employers will not be required to collect hours worked data for exempt workers if they do not already keep it.

Current EEO-1 job categories and the 12 pay bands:

• The ten EEO-1 job categories are familiar to employers because they already group their employees by these job categories for the current EEO-1 report.
• The EEOC has used these ten EEO-1 job categories effectively in conducting statistical analyses that inform investigations of issues such as hiring discrimination.
• The 12 pay bands would track those used by the Bureau of Labor Statistics in the Occupation Employment Statistics survey and cover most workers in the United States. Data reported in pay bands can be highly useful for statistical analysis, especially when there is a large data set, as there will be for this EEO-1.

Why Does the EEOC Need to Collect W-2 Income?

The EEOC concluded that using W-2 income is important because:

• Supplemental pay such as bonuses, overtime, and premium pay, is more and more central to compensation in the U.S. and it is included in W-2 income but not in base pay.
• Pay discrimination is complex, is influenced by many factors, and is not limited to base pay.
• The information provided by the W-2 in combination with the existing EEO-1 infrastructure will provide valuable insights across regions, industries, and occupations, as well as gender, race and ethnicity.

When Would the EEOC Begin Collecting Pay Data from Employers?

Employers would file the first new EEO-1 report, including pay data, by March 31, 2018.

• This gives employers 18 months to transition to the new system, rather than 12 months, as the EEOC originally proposed.
• March 31st provides employers time after they complete calendar-year tax forms, so they can report W-2 Box 1 numbers prepared for tax purposes. The EEOC would not require any special calculations, as the EEOC's original February 1, 2016 proposal did.
• The next EEO-1 report is due on September 30, 2016. There are no changes on this report. Employers will not be required to provide pay data this year. Then, employers do not have to file an EEO-1 report for 18 months, until March 31, 2018.

Will the data collection be burdensome?

The EEOC carefully considered employers' comments about the agency's burden calculations. In response to employer feedback, the agency adjusted its estimate of the hours and resulting costs for this report. Although the estimate of the burden on employers has increased, the updated proposal actually reduces the work for employers, as compared to the original proposal.

• Importantly, the EEOC reduced the work needed to complete the EEO-1 by allowing employers to use the same W-2 report it uses for tax purposes, and by moving the deadline to coordinate with the existing W-2 calendar year.
• The EEOC considered employer feedback that a range of professionals spend time on preparing the EEO-1. The revised burden estimate and now accounts for the time and wage rates of everyone from a Chief Executive Officer who may need to review the EEO-1 before certification, to software and human resources staff, and legal counsel who may review it.
• The EEOC also adjusted the burden calculation to respond to feedback that many employers still have staff enter data onto the EEO-1 online portal and do not use a centralized data upload for all the EEO-1 data. The EEOC estimates that the annual burden of preparing the existing EEO-1 is approximately $30 million.

The EEOC estimates that the addition of pay data will increase the annual cost for time spent completing the EEO-1 report by about $416 per employer, totaling about $25 million for all employers who must file it. This is an estimate; some employers will have higher annual costs and others will have lower annual costs.

The EEOC also provides an estimate of one-time implementation costs, which represents the time and expense to employers of changing their EEO-1 reporting systems. The EEOC estimated that the additional of pay data will result in a one-time implementation cost of about $446 per employer, totaling about $25 million for all employers who must file it.

Will the information be confidential?

The EEOC and OFCCP will adhere to strict confidentiality requirements and protect the confidentiality and privacy of the pay and hours worked data.

Title VII prohibits the EEOC and its contractors from making public any information from the EEO-1 before the start of a Title VII lawsuit that involves the information. Any violations of this statute by EEOC staff are subject to criminal penalties including imprisonment.

OFCCP will protect the confidentiality of EEO-1 pay and hours-worked data to the maximum extent possible consistent with the Freedom of Information Act and the Trade Secrets Act.

The EEOC takes extensive measures to protect the confidentiality and integrity of EEO-1 data, including:

• Training staff in data protection and security;
• Maintaining a robust cyber security and privacy program in compliance with the Federal Information Security Modernization Act of 2014; and
• Monitoring on an ongoing basis the EEOC's systems.
• Additionally, EEO-1 reports are encrypted for employers submitting the EEO-1 report using the data upload option.