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EEOC proposes electronic submission of compensation data in EEO-1 Report

By Cynthia L. Hackerott, J.D.

In conjunction with the White House commemoration of the seventh anniversary of the Lilly Ledbetter Fair Pay Act, the EEOC announced on January 29, a proposed revision to the existing Employer Information Report—commonly known as the EEO-1 Report—to include collecting pay data from employers with more than 100 employees. According to an EEOC press release, this new data will assist the EEOC and the OFCCP in identifying possible pay discrimination and assist employers in promoting equal pay in their workplaces. A separate compensation data collection proposal, published by the OFCCP in August 2014, which would have applied only to federal contractors, will not be implemented. The EEOC’s proposal is slated for publication in the Federal Register on February 1, 2016, with public comments due by April 1, 2016.

Current 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 EEO-1 Report with the Joint Reporting Committee (a joint committee consisting of the EEOC and the OFCCP). The current EEO-1 Report data provides the federal government with workforce profiles from private sector employers by race, ethnicity, sex, and job category. The EEOC’s proposal, made in partnership with the OFCCP, would add aggregate data on pay ranges and hours worked to the information collected, beginning with the September 2017 EEO-1 Report. This 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.

This pay data collection would allow 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, according to the EEOC. 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 EEOC and the OFCCP plan to develop statistical tools that would be available to staff on their computers, to utilize 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.

The Commission has posted the proposed compensation data collection form, as well as a Fact Sheet for Small Business and a Question and Answer document on its website.

OFCCP drops separate Equal Pay Report proposal. The “OFCCP plans to utilize [the EEOC’s proposal for] EEO-1 pay data [collection] for federal contractors with 100 or more employees instead of implementing a separate compensation data survey as outlined in its August 8, 2014, NPRM,” the EEOC proposal states in a footnote (#63). The OFCCP’s now defunct proposal would have required covered federal contractors and subcontractors to submit an annual “Equal Pay Report” on employee compensation as a supplement to the EEO-1 Report (79 FR 46562- 46606; corrections published on August 20, 2014 at 79 FR 49260-49261). The extended deadline for public comments on that proposal ended on January 5, 2015.

“The OFCCP’s Equal Pay Report is now officially dead,” attorney John C. Fox, a former OFCCP official and current president of Fox, Wang & Morgan P.C. in Los Gatos, California told Wolters Kluwer’s Employment Law Daily. “As I reported in my DirectEmployers Blog earlier this month, OFCCP has abandoned its Equal Pay Report and is now going to use instead the results and fruits of the EEOC’s EEO-1 report proposal, should the EEOC proposal survive and go to final form,” he said.

EEOC proposal background. Starting in 2010, the EEOC and the OFCCP participated in the President’s National Equal Pay Task Force; following the task force’s recommendation, the EEOC commissioned a National Academy of Sciences (NAS) study on how to collect pay data from employers. The NAS issued its report in 2012, and based on a recommendation from that report, the EEOC contracted to conduct an independent pilot study on collecting pay data, which was completed in September 2015. In 2012, the Commission also convened human resources information systems (HRIS) experts, information technology specialists, and employer stakeholders, to discuss EEO surveys, including the EEO-1 and pay data. Finally, the EEOC discussed the above-referenced OFCCP pay data proposal with the OFCCP and considered the public comments submitted in response to that proposal. Further, the EEOC and the OFCCP together consulted with the Department of Justice, focusing on how EEO-1 pay data would be used to assess complaints of discrimination, focus investigations, and identify employers with existing pay disparities that might warrant further examination.

“The loss of the Equal Pay Report is a large and embarrassing blow to OFCCP which Secretary Perez is trying to minimize by saying that OFCCP is joining with the EEOC in its proposal,” according to Fox. “However, the Proposed Revision of the EEO-1 is put forward, in fact, solely by the EEOC and not OFCCP.”

Coverage. The current EEO-1 Report requires certain federal contractors with 50-99 employees and other private employers with 100 or more employees to report annually, by September 30th, the number of individuals they employ by job category and by race, ethnicity, and sex. Under the EEOC’s proposal, employers, including federal contractors, with 100 or more employees would submit data about pay. However, 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.

Measurements. Currently, the required reporting data includes seven race and ethnicity categories and ten job categories, by sex.

  • The ten EEO-1 job categories are: Executive/Senior Level Officials and Managers; First/Mid Level Officials and Managers; Professionals; Technicians; Sales Workers; Administrative Support Workers; Craft Workers; Operatives; Laborers and Helpers; Service Workers.
  • The seven race and ethnicity groups are: Hispanic or Latino, White (Not Hispanic or Latino); Black or African American (Not Hispanic or Latino); Native Hawaiian or Other Pacific Islander (Not Hispanic or Latino); Asian (Not Hispanic or Latino); American Indian or Alaska Native (Not Hispanic or Latino); and Two or More Races (Not Hispanic or Latino).

The proposal would require covered employers to identify employees’ total W-2 earnings for a 12-month period looking back from a pay period between July 1st and September 30th. It would also account for part-time workers, those who worked less than a full 12 months, and workers with W-2s from multiple employers.

Format. Under the proposal, W-2 pay would be reported in “pay bands.” Employers would tally and report the number of employees whose W-2 pay for 12 months was in each pay band. There would be 12 pay bandswhich track the 12 pay bands used by the Bureau of Labor Statistics in the Occupation Employment Statistics survey—for each of the EEO-1 job categories:

(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.

Employers would tabulate and report the number of employees whose W-2 earnings for the prior 12 months fell within each pay band. For example, an employer would report on the EEO-1 that it employs 10 African American men who are Craft Workers in the second pay band ($19,240-$24,439).

Employers would not report individual pay or salaries and would not calculate average salaries or the standard deviation of those salaries. According to the EEOC, W-2 earnings are useful for assessing pay discrimination because they include not only wages and salaries, but also other compensation such as commissions, tips, taxable fringe benefits, and bonuses. Most employers’ existing HRIS and pay systems include W-2 earnings data elements, the EEOC maintains. HRIS systems generally allow the calculation of W-2 earnings for any 12-month period, and not just for the calendar year. The EEO-1 would use aggregate pay for a 12-month period looking back from a pay period between July 1st and September 30th of the reporting year, as selected by the employer. For example, an employer could use aggregated W-2 data for the twelve months looking back from the second pay period in July of the reporting year.

Why pay bands? Pay bands would generate reliable aggregated data to support meaningful statistical analysis, the EEOC asserts, by allowing the EEOC and the OFCCP to compute within-job-category variation, across-job-category variation, and overall variation, thus supporting the agencies’ ability to discern potential discrimination while preserving confidentiality. HRIS software developers also are accustomed to using pay bands for the EEOC’s EEO-4 survey, which has long reported pay data for employees of state and local governments, the Commission reasons.

Part-time and seasonal employment. Because the proposed EEO-1 Report revision would report hours worked as well as data about W-2 earnings, it would allow the EEOC and the OFCCP to meaningfully analyze pay differences by taking into account periods of time when employees were not employed, such as when an employee worked part time or for less than the entire year. Almost all employer payroll systems already maintain data on the hours worked by employees, the EEOC states. The proposal requests employer input on how to report hours worked for salaried employees.

Confidentiality. As the proposal explains, Section 709(e) of Title VII, 42 U.S.C. Sec. 2000e-8(e), forbids the EEOC or any EEOC officer or employee from making public any information, including EEO-1 data, before a Title VII proceeding is instituted that involves that information. Any EEOC officer or employee who violates this prohibition is guilty of a misdemeanor. The OFCCP holds contractor data that it receives from the Joint Reporting Committee confidential to the maximum extent permitted by law, in accordance with Freedom of Information Act Exemption 4 and the Trade Secrets Act. Moreover, the EEOC does not publish individual EEO-1 Reports; rather, the Commission only publishes aggregated EEO-1 data in a manner that does not reveal any particular employer’s or employee’s information.

“The EEOC tries to make it appear that it has followed the Recommendations of the National Academy of Sciences,” Fox observed. “However, [t]he EEOC has not followed all six recommendations of the NAS, but has instead rushed its compensation pay proposal forward by several years before it becomes too late in the last year of President Obama’s tenure.”

“Specifically, the EEOC has not sought and obtained legislation to protect corporate pay data in OFCCP’s possession from disclosure (that was NAS Recommendation 6),” Fox continued. “While Title VII of the 1964 Civil Rights Act is one of the 100 or so federal anti-disclosure statutes which contains document secrecy requirements (it prohibits the EEOC from disclosing information or documents to the public in the possession of the EEOC), the OFCCP is not subject to Title VII’s secrecy requirements. So, the EEOC may lawfully (and must) refuse to disclose EEO-1 reports in response to requests from members of the public for EEO-1 data. However, the OFCCP MUST release its copies of the EEO-1s (pursuant to the Federal Freedom of Information Act). Significantly, too, the OFCCP is the ONLY federal agency to which the EEOC gives EEO-1 data which does not have to sign a confidentiality agreement as a condition of access to the EEOC’s EEO-1 data. Astoundingly, the EEOC has NOT proposed to at least so require OFCCP to also sign confidentiality agreements before receiving EEO-1 data from the EEOC’s Joint Reporting Committee.”

In addition, “the EEOC has not undertaken research studies to study ways to house corporate compensation data from being hacked while stored in EEOC computers. (That was NAS Recommendation 5),” Fox points out. “If the White House, the Office of Personnel Management and SONY can be hacked, what makes anyone think the EEOC’s and OFCCP’s computers can’t be hacked, too?”

Fox also noted that “[t]he Office of Personnel Management this month decided the hacking threat was so great to its confidential employee files of all federal civilian employees, including those with Top Secret clearances; OPM has proposed to move its databases to a new agency to house its data under the auspices and protection of the US Department of Defense behind DoD’s firewalls.”

Employer burden. The EEOC estimates that each employer that submits the pay data would incur a minimal one-time cost to develop new queries in its existing human resources information system. HR software developers are familiar with how to use pay bands to report pay data. In addition, the EEOC estimates that each employer would incur a minimal increase in its annual cost to report this pay data electronically on the proposed EEO-1. The Commission believes that currently nearly all EEO-1 filers already use electronic recordkeeping and reporting, and states that employers could ask for an exception to the electronic filing requirement if necessary.

Public hearing. The EEOC’s notice states that a public hearing concerning the proposed changes to the EEO-1 will be held at a place and time to be announced. After coordination with the OFCCP, the Commission will vote on a final version of the revised EEO-1 Report and send it to the Office of Management and Budget for final review and approval under the Paperwork Reduction Act.

Agency comments. “More than 50 years after pay discrimination became illegal it remains a persistent problem for too many Americans,” said EEOC Chair Jenny R. Yang “Collecting pay data is a significant step forward in addressing discriminatory pay practices. This information will assist employers in evaluating their pay practices to prevent pay discrimination and strengthen enforcement of our federal anti-discrimination laws.”

“We can’t know what we don’t know. We can’t deliver on the promise of equal pay unless we have the best, most comprehensive information about what people earn,” said Secretary of Labor Thomas E. Perez. “We expect that reporting this data will help employers to evaluate their own pay practices to prevent pay discrimination in their workplaces. The data collection also gives the Labor Department a more powerful tool to do its enforcement work, to ensure that federal contractors comply with fair pay laws and to root out discrimination where it does exist.”

Proposal’s focus is wrong, according to Fox. “The greatest problem with the EEOC’s proposal is that it is proposing to analyze the wrong thing,” Fox said. “The EEOC proposes to analyze W-2 data, and NOT the ‘rates of pay’ as the NAS suggested in Recommendation # 4 and as Title VII law would require.” He pointed out that NAS Recommendation 4 states, “[t]he Equal Employment Opportunity Commission should collect data on rates of pay, not actual earnings or pay bands, in a manner that permits the calculation of measures of both central tendency and dispersion.”

Thus, the proposal would result in “garbage in, garbage out,” he concludes. “This is a fatal flaw to any resulting discrimination analyses and tells discrimination law analysts absolutely nothing. Moreover, the EEOC and OFCCP discrimination analysts MUST analyze discrete ‘pay decisions,’ and not current pay. This is fundamental Title VII law[, which] the EEOC has entirely ignored.”

Other problems. “The second biggest problem with the EEOC’s proposal is that it is trying to analyze pay by forcing the entire private sector into the pay structure of the federal government,” Fox added. “Instead of 15 pay bands, as the federal government has, the EEOC’s proposal seeks to force employers to report all pay in 12 broad salary bands. The OFCCP considered this ‘pay bands’ approach in the Carter Administration in the late 1970s and rejected it because pay bands cut across different job titles and thus collect together for analysis very different kinds of employees (for example: engineers, lawyers, accountants, and line managers). Pay bands satisfy the statistician’s instinct to collect together groups of employees large enough to make for meaningful statistical analyses, but defeat proper discrimination analyses which all require comparison of ‘similarly situated’ employees. Again, garbage in, garbage out. The EEOC is proposing to consciously waste federal taxpayer dollars and visit substantial investigative cost burdens on innocent employers.

“The EEOC’s proposal, if implemented, will reveal great disparities in pay because by definition, the EEOC will be collecting the pay of very different kinds of employees force gathered within the same pay band and then falsely assuming, for purposes of statistical analysis, that all of the employees under analysis are ‘similarly situated.’ The EEOC will simply not be analyzing similarly situated employees. ‘False positives’ will abound and the country will be on a long rabbit-hole chase to reconcile the ‘apparent p[ay disparities’ the false measure will identify. In fact, employers throughout the country will then be entreated to engage in the kind of long, tedious, pay justifications which has made OFCCP notorious in the federal contractor community over the last six years. Tens of thousands of dollars spent per investigation with few findings of unlawful pay discrimination (less than 1 ten-thousandth of 1 percent violation rate across over 26 million federal contractor pay files).”

Predictions. Employers will oppose the EEOC’s proposal vigorously as another expensive pie-in-the sky idea not likely to advance the cause of civil rights or pay equity in America,” Fox predicts. “If approved, the EEOC’s EEO-1 report will be expensive to employers to defend what will be tens of thousands of innocent and benign ‘pay disparities’ the EEOC statistical formulas will identify.”

“Nor will the EEOC proposal eradicate the so-called ‘wage gap’ in America,” he added. “The OFCCP’s investigation of over 26 million employee pay files in the last six years—the first ever such longitudinal study of pay with complete pay data—has now revealed that occupation selection accounts for the pay gap, and not differential pay to similarly situated employees,” he emphasized.