July 15, 2016

EEOC Adjustment to Proposed Revision to EEO-1 Reports Fail to Address Significant Concerns Raised by Employers

Employers nationwide reacted strongly to the Equal Employment Opportunity Commission's (EEOC) January 2016 proposed rule that would require federal contractors and other employers with 100 or more employees to report summary employee pay data in their annual EEO-1 reports. See EEOC Seeks to Expand Pay Discrimination Enforcement Capabilities with Proposed Revisions to EEO-1 Form and Concerns Loom Over EEOC's Efforts to Obtain Data Targeting Discriminatory Pay Practices.

Following receipt of hundreds of public written comments and a public hearing on March 16, 2016, the EEOC this week published its final proposal to supplement the EE0-1 report for a second round of public comments. Besides delaying the implementation of the new pay data component of the EEO-1 report to better align with federal obligations to calculate and report W-2 earnings, the EEOC's proposed changes do little to assuage significant concerns raised by employers.

Importantly, the EEOC rejects challenges to its original proposal of using 12 pay bands to collect broad aggregates of data from dissimilar jobs combined into arbitrary groupings in an effort to determine whether there are discriminatory pay practices, and dismisses concerns raised regarding the likelihood of meaningless statistical analyses of such data leading to unfounded inferences of discrimination. Rather, the EEOC responds that "it is not critical that each EEO-1 pay band include only the same or similar occupations" because it intends to use the data for identifying patterns or correlations to inform the early stages of investigation and to periodically publish reports on pay disparities. Also, the EEOC's reference to confidentiality protection under Title VII and exemptions to disclosure under the Freedom of Information Act, and its description of the EEOC's and OFCCP's security practices, do not meaningfully address the significant data security, privacy and competition concerns relating to the compensation data that will be submitted.

Changes proposed in the 30-Day Notice include the following:

  • Delaying implementation of the new reporting guidelines from the initially proposed date of September 30, 2017, until March 31, 2018. Then, beginning with the EE0-1 report for 2017:
    • The reporting deadline for all EE0-1 filers will be March 31 of the year following the EEO-1 report year (e.g., the 2017 EEO-1 report will be due on March 31, 2018).
    • The "workforce snapshot" will be changed to a pay period between October 1 and December 31 of the reporting year.
  • Specifying that employers should use Box 1 of Form W-2 as the measure of pay for the new component of the EEO-1, which includes supplemental pay (e.g., overtime, shift differentials, bonuses).

  • Defining "hours worked" in accordance with the Fair Labor Standards Act and requiring employers to report hours worked for exempt employees by either:
    • Reporting a proxy of 40 hours per week for full-time exempt employees, and 20 hours per week for part-time exempt employees, multiplied by the numbers of weeks the employees were employed during the EEO-1 reporting year; or
    • Providing actual hours of work by exempt employees during the EEO-1 reporting year if the employer already maintains accurate records of this information.

With respect to "hours worked" for exempt employees, the EEOC does not take into consideration employees who work an alternative reduced schedule, or address the critical facts that employers do not currently collect hours information for exempt employees and that full-time exempt employees regularly work more than 40 hours. Accordingly, the hours data collected for exempt employees will likely be inaccurate, and therefore, of limited use for compensation analyses.

The proposed rule is available on the Federal Register website. Interested parties will have 30 days to submit comments.

Given the current political climate, we anticipate the EEOC will likely publish the final rule before the end of 2016, and we will continue providing updates on this important change to employers' reporting requirements. In the interim, we encourage employers potentially impacted by the proposed rule to work with their counsel to identify risks and strategies to reduce the risks before being required to report their compensation data to the EEOC. While the updated proposed rule will provide more time for employers to comply, keep in mind that even with a 2018 reporting deadline, employers will be reporting compensation data from 2017. Accordingly, if an employer is considering adjustments to its pay structure, it must be working toward that goal now for 2017 implementation.

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