On Friday, January 29, 2016, the Equal Employment Opportunity Commission (EEOC) announced the agency’s intent to require a new obligation for employers with at least 100 employees to submit data on wages earned and hours worked to the agency in annual reports[1]. The intent of the new requirement is to make it easier for the EEOC to identify possible pay discrimination issues and assist employers in efforts to provide equal pay for employees.
The EEOC’s announcement would mean revisions to the Employer Information Report (EEO-1) already submitted by some private employers annually[2]. The report has historically collected information on employee ethnicity, race, and sex by job category[3]. The reporting obligation has previously depended on number of employees and whether the employer works on federal contracts[4]. Since 1966, private employers with at least 100 employees, and employers performing federal contracts and who have at least 50 employees have been required to submit the EEO-1 report annually. Small private employers with less than 50 employees have not been required to submit information regardless of whether they work on federal contracts.
Under the anticipated changes, employers including federal contractors with at least 100 employees will be required to report pay data on earnings and hours worked along with the previously required EEO-1 information on ethnicity, race, and sex. Employers that are federal contractors and have between 50-99 employees, and employers who do not perform federal contracts but have 99 or fewer employees will be free of EEO-1 reporting obligations.
If the proposed changes go into effect, employers will need to collect and report on employee earnings as measured by W-2 information for a 12 month period as measured between July 1st and September 30. The employer will be able to select the 12 month period within that window. For example, an employer may choose to determine W-2 earnings as paid to employees in the 12 month period as measured back from the second pay period in July. Along with W-2 earnings, employers will also need to report employee hours worked for all employees falling within the same pay range. The anticipation is that reporting hours worked within the same pay range will allow the EEOC to account for periods of time when employees are not working, such as part time employees or employees who only worked for part of the 12 month period.
EEO-1 reporting currently identifies ten job categories ranging from Executive/Senior Level Officials and Managers to Service Workers. There are seven potential race and ethnicity groups. The proposed pay data requirement anticipates twelve pay bands. The proposed pay bands start at a low of $19,239 and under and go to a high of $208,000 and over. As an example, an employer may be required to report that it has eight male Asian employees performing as Sales Workers, compensated in the sixth pay band, and who worked a total of 12,000 hours.
The full notice of the proposed revision to the EEO-1 is available online[5], and comments may be submitted until the comment period ends on April 1, 2016. The new requirements are anticipated going into effect in 2017, with pay data to be included in the EEO-1 reporting by the September 30, 2017 filing deadline. If the changes are put into effect this year as expected, the EEOC will post a notice on its official web site and will provide an additional written notice to existing EEO-1 recipients of the changes and need to submit pay data information with the 2017 EEO-1 information collection cycle. At present, the EEOC anticipates that because of the changes, EEO-1 information will not need to be reported until the 2017 cycle.
Going forward, there are several considerations for employers subject to reporting.
- Establish a regular measurement date for W-2 wages paid: Consistency in determining the 12 month period measurement date will likely be the most effective and convenient way for employers to gather the pay data needed for reporting. The window for assessment is relatively limited and must be measured using a date falling between July 1 and September 30 of the particular reporting year. It is likely that administratively the task of compiling the data across all employee pay bands will be most efficiently done using one consistent trigger date.
- Anticipate the need to organize and properly report the data: The EEOC anticipates that most if not all employers subject to the reporting requirement will already have the anticipated pay data information available, and that employers may face a short term and possible costs to integrate all the data for reporting. In anticipation of the first reporting period in 2017, it will likely be best to develop and put systems in place early to internally track and compile the necessary data.
- Use the requirement as a risk management tool: The data sought by the EEOC can also be utilized internally by employers to identify whether disparities exist, and if so, the reasons for any disparities. If disparities or unusual results are found, employers may wish to consult with counsel familiar with employment issues to determine whether legitimate business reasons exist to justify the results or to determine best options to address and fix a potential problem.
_____________________________________________________________________________________
Patrick Pearce is a member of Ogden Murphy Wallace, P.L.L.C., and practices in the firm’s Employment and Labor Law group. He can be reached at pspearce@omwlaw.com. The above article is a broad outline of a complex topic and should not be relied upon for purposes of legal advice.
[1] http://www.eeoc.gov/eeoc/newsr...
[2] A sample copy of the EEO-1 may be found at http://www.eeoc.gov/employers/eeo1survey/upload/eeo1-2.pdf.
[3] The reporting obligation resulted from regulations issued pursuant to Section 709(c) of Title VII of the Civil Rights Act of 1964, which required employers to make and keep records relevant to the determination of possible unlawful employment practices, preserve such records, and produce reports to the agency.
