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Proposed EEO-1 Report changes: Progress or folly?

March 17th, 2016  |  Pamela Wolf

On March 16, the EEOC held a hearing on its proposal to revise the existing EEO-1 Report to include collection of pay data from employers with more than 100 employees. Although the EEOC has said that the new data would help the EEOC and the OFCCP in identifying possible pay discrimination and assist employers in promoting equal pay in their workplaces, the proposal quickly drew pointed criticism over its estimated recordkeeping burden, the usefulness of the massive data collection, and confidentiality. Yet others saw the proposed changes as an important path to narrowing the persistent wage gap.

The EEOC’s proposal, made in partnership with the OFCCP, would add aggregate data on pay ranges and hours worked to the form, in addition to the information already provided by private sector employers on race, ethnicity, sex, and job category. The new information would be reported across 10 job categories and by 12 pay bands and would not require the reporting of specific salaries of each individual employee. A White House fact sheet states that the proposal would cover over 63 million employees.

Amassing helpful data. This pay data collection purportedly would permit the EEOC to compile and publish aggregated data that will help employers in conducting their own analysis of their pay practices to facilitate voluntary compliance, the EEOC said. Both agencies would use this pay data to assess complaints of discrimination, focus agency investigations, and identify existing pay disparities that may warrant further examination. The two agencies plan to develop statistical tools that would be available to staff to use the EEO-1 pay data for these purposes. They also anticipate developing software tools and guidance for stakeholders to support analysis of aggregated EEO-1 data.

Recordkeeping burden. One aspect of the proposal that has drawn criticism is the burden placed on businesses that would be required to complete a 3,360-cell spreadsheet. Seyfarth Shaw attorney Camille Olson, who testified on behalf of the U.S. Chamber of Commerce, pointed to the EEOC’s burden analysis, which she said was “completely lacking in any substance and has no basis in fact.” Olson leveled several criticisms about the recordkeeping burden estimated by the agency:

  • The EEOC suggests that a “revised form” with almost 26 times the number of data points to complete will impose no additional burden and cost 50 percent less than the previous form, which was approved in 2015.
  • The EEOC and its consultant admit that there was no testing of the form or the time that would take to complete it, but rather that it used “synthetic data” compiled from fictitious companies to produce an estimate of the time required to complete the new forms.
  • The EEOC refers to proposals by other agencies, which have never been completed and which have never been published, to sustain its estimate of burden.
  • The EEOC, through sleight of hand, arbitrarily eliminated from its analysis of the burden the time and effort required to submit data relating to more than 250,000 employer establishments. Under the EEOC’s proposal, employers will still be required to submit data for the 250,000 establishments that have been omitted from the Agency’s burden analysis. The EEOC simply ignores this fact.

Won’t fight discrimination. According to both Olson and SHRM Executive Janese Murray, this huge data collection effort will do nothing to help fight discrimination. Olson said that the EEOC failed to even offer any argument that the data submitted will be useful for any law enforcement or policy enhancement, laying out these particular points:

  • The laws that the EEOC enforces do not permit the consideration of broad aggregates of data from dissimilar jobs combined into artificial groupings. There can be no legal or enforcement use of this data. Indeed, the EEOC’s own compliance manual and its consultant recognize that these broad aggregations of data are essentially useless. Myriad federal courts have reached the same conclusion.
  • The EEOC is requiring the combining of completely dissimilar jobs to determine if there is pay discrimination. For instance, the proposed revised forms will require a reporting hospital to combine lawyers, doctors, nurses, and dieticians—all grouped as “professionals”—to somehow determine whether there are pay disparities based on gender, race, or ethnicity. No law permits comparisons of such diverse workers to prove discrimination.
  • In order to meet its own bureaucratic timetable, the EEOC will require employers to combine two distinct years of W-2 data to create a fictitious W-2 amount for employees. This combination of W-2 data over a two-year period will yield completely useless information. It does not take into account job changes, promotions, annual pay adjustments, different working conditions, or locations, or the many other factors that go into compensation.
  • The EEOC will require employers to collect and report the hours worked for all employees. While the EEOC suggests that it will not require collection of new information from employers, they have not addressed the critical fact that employers do not currently collect hours information for exempt employees. The EEOC suggests that employers may use a “default” number of 40 hours for each exempt employee. In the private sector, exempt employees regularly work more than 40 hours; thus the hours information would be inaccurate, and therefore, of limited use. A legitimate study before this proposal was published would have revealed that fact.

Confidentiality concerns. Both Olson and Murray also raised confidentiality concerns for the data submitted and the EEOC’s handling of that data. “SHRM and its members are very concerned about the confidentiality of the compensation data the EEOC proposes to collect,” Murray said. “The EEOC’s proposal would gather very specific compensation information by specific establishments, including very small establishments, using a web-based format …. reporting data in this manner will result in the reporting of individual, employee-level data. Our concerns are not just focused on protecting our companies, but also on protecting our employees, many of whom would not be happy if their personal pay information was widely disclosed as a result of a data breach of the EEO-1 reporting system.”

Murray also questioned the security of EEO-1 Reports emailed to the EEOC for batch uploading. “It goes without saying that this is obviously not a secure way to transmit large amounts of confidential information, yet EEOC’s proposal makes no mention of how the agency plans to revise its own protocols to ensure that employers can safely report their compensation information to the government,” Murray said. “SHRM and its members urge the EEOC to not move forward with the implementation of any compensation data collection tool until appropriate data security safeguards are developed, tested, and perfected to ensure protection of our employees’ pay data.”

Data would help narrow the pay gap. A group of Democratic Senators, led by Sen. Cory Booker (D-N.J.), saw the proposed changes to the EEO-1 Report much differently, underscoring the need for additional measures that would help narrow the pay gap that has been so detrimental to women. In a letter sent to EEOC Commissioners, the Senators said the EEO-1 proposal would help achieve that goal by:

  • Increasing public transparency on compensation.
  • Supporting employer efforts to self-monitor compensation practices.
  • Strengthening the EEOC’s enforcement efforts.

“The compensation data collected by the revised EEO-1 will give the public valuable insight into what the pay gap looks like both geographically and by industry,” according to the letter. “Employers will also benefit by, for the first time, being able to benchmark their performance versus their competition. They will also be able to empower their human resource departments to make data-driven changes to address any pay gaps that may exist within a firm. Equally important is that the new compensation data will strengthen the EEOC’s ability to investigate allegations of pay discrimination and better enforce existing law.”