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In revised EEO-1 proposal, EEOC missed opportunity to increase utility, decrease burden, expert explains

August 12th, 2016  |  Cynthia L. Hackerott

In the EEOC’s recent revision of its proposal to add the collection of summary pay data to the EEO-1 Report, the agency has declined to adopt some stakeholder recommendations that could have simultaneously increased the utility of the proposed information collection and decreased the burden on employers, according to attorney Mickey Silberman, a Principal in the Denver, Colorado, office of Jackson Lewis P.C. Moreover, despite the proposed new data collection, the agency would still lack the necessary data to precisely and accurately identify potential pay discrimination and then use those results to correctly target employers for investigations and audits, he said. Silberman further stated that the revised proposal does not adequately address confidentially concerns raised by some employers in response to the original proposal.

The agency published its original proposal in the Federal Register on February 1, 2016 (81 FR 5113- 5121), and the comment period for that original proposal closed on April 1, 2016. The revised proposal was published in the Federal  Register on July 14,  2016 (81 FR 45479-45497), and public comments are due by August 15, 2016.

Current reporting obligations. Federal regulations require that all employers in the private sector with 100 or more employees, and some federal contractors with 50 or more employees, annually file the Employer Information Report, commonly known as the EEO-1 Report, with the Joint Reporting Committee (a joint committee consisting of the EEOC and the OFCCP) by September 30. The current EEO-1 Report data provides the federal government with workforce profiles from private sector employers by race, ethnicity, sex, and job category. In its revised proposal, the EEOC refers to this data as “Component 1.”

Proposed changes. In both the original and revised proposals, which the Commission says were made in partnership with the OFCCP, the EEOC proposes adding aggregate data on pay ranges and hours worked to the form, in addition to the Component 1 data. The revised proposal refers to this added data collection as “Component 2.” 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. Federal contractors with 50-99 employees would not report pay data but would continue to report ethnicity, race, and sex by job category. Consistent with current practice, non-contractor employers with 1-99 employees and federal contractors with 1-49 employees would not be required to file the EEO-1 Report.

Under the revised proposal, the due date of the 2017 report would move from September 30, 2017 to March 31, 2018, to simplify employer reporting by allowing employers to use existing W-2 pay reports, which are calculated based on the calendar year. Employers would use Box 1 of Form W-2 (W-2 income) as the measure of pay for Component 2 of the EEO-1 Report.  By definition, W-2, Box 1 includes income that is received between January 1st and December 31st of the relevant calendar year. The revised proposal would also change the “workforce snapshot” to a pay period between October 1st and December 31st of the reporting year, starting with the EEO-1 Report for 2017.

Notably, the reporting schedule for 2016 EEO-1 Report remains unchanged. EEO-1 respondents must comply with the September 30, 2016, filing requirement for the currently-approved EEO-1, and must continue to use the July 1st through September 30th workforce snapshot period for that report.

Expert insight. Silberman, the Chair of the Jackson Lewis Affirmative Action & OFCCP Defense Practice Group and the Co-head of the firm’s Pay Equity Resource Group, provided his insights on the revised proposal in the following interview with Employment Law Daily:

ELD: While the EEOC made a few changes to its original proposal in light of stakeholder concerns, the agency did not adopt many stakeholder recommendations. Which of these do you think are the most important to employers?

Silberman: The most important, and one rejected by EEOC, is a change to the requirement to submit W-2 earnings data and work hours, rather than annualized base salary or hourly pay rate, recommended by so many stakeholders who submitted comments. EEOC’S decision to use W-2 earnings goes to the heart of the burden and utility of this proposal. Submitting W-2 earnings data and work hours will be extraordinarily burdensome because it will force employers to gather race/ethnicity and sex, as well as the W-2 earnings and work hours, from different systems – at least two separate systems (HRIS and payroll) for most employers and a third (work hours time-keeping) for many.  Generating, reconciling and merging large data sets from different systems is a complex and burdensome project and one which EEOC does not appear to fully appreciate, based on its burden estimate. Also, receiving W-2 earnings will not permit EEOC and OFCCP to focus distinctly on base pay or other individual components of pay (for example – bonuses, overtime, commissions). As a result, it will not allow the agencies to get at a real picture of employers’ pay systems and will cause them to arrive at conclusions and initiate investigations of employers based upon “false positives.” Finally, if EEOC accepted the recommendation, the use of annualized salary or hourly pay rate would have eliminated the need to report work hours; thus, EEOC could have simultaneously increased utility and decreased burden but chose not to.  The minimal utility of collecting W-2 data does not justify the burden and expense to employers.  By going after more, EEOC is actually getting less helpful data.

ELD: The EEOC revised its estimated burdens in light of the public comments. Are the revised estimates realistic? Are the statements regarding employer HRIS systems accurate/realistic?

Silberman: We discussed this issue with many employer representatives directly involved in EEO-1 reporting and ran our own simulations. Based upon those efforts, while EEOC increased its burden estimate somewhat, EEOC update burden projection continues to vastly underestimate the actual burden that will be imposed upon employers.

ELD: What are your thoughts on the agencies’ assertions regarding employer’s confidentiality concerns?

Silberman: There are really three issues here, each of which presents real risk to employers: data security, meaning whether the submitted data is secure from data system and transmission breaches; access to the pay data by the public through FOIA; and, confidentiality concerns related to EEOC’s plan to publish aggregates pay data:

  1. EEOC has responded to the first of these issues with largely the same statements as the original proposal. Data security experts should weigh-in on the first issue.
  2. As for FOIA requests, protection of EEO-1 data is not absolute for federal contractors, which most large U.S. employers are. Whereas requests to EEOC “will be denied by the EEOC under Exemption 3 of the FOIA,” OFCCP will only protect EEO-1 data “consistent with FOIA” which does not provide a blanket protection from disclosure. And almost certainly there will be greater public interest in obtaining EEO-1 data than in the past, so we have concerns about OFCCP’s disclosure of pay data in response to FOIA requests.
  3. Finally, under some circumstances (for example, in rural areas), EEOC publishing aggregate pay data by industry and geography may identify particular employers and, even, employees. Despite many comments by stakeholders raising this concern, EEOC has not addressed this important issue.

ELD: In the revised proposal, the EEOC goes into some detail about its justifications for collecting pay data. Will this proposed pay data collection be as effective for enforcement as the agencies suggest?

Silberman: In a word, no.  Based on the proposal, EEOC would lack the necessary data to precisely and accurately identify potential pay discrimination and then use those results to correctly target employers for investigations and audits. To the contrary, false positives will be a common outcome of analyses on the proposed data collection, leading to unnecessary time and effort expended by the agencies and burden on employers not deserving of such scrutiny. At most, the prospect of having to annually submit pay data to the federal government may prompt employers to give more attention to pay equity [that] otherwise would not. That may be a positive byproduct of this proposal, but there are more efficient and effective methods to achieve that goal.