The EEOC unveiled its proposed revisions to the Employer Information Report (EEO-1) last month. With the revisions, the EEOC hopes to gather additional data to help better discern pay discrimination. However, the revisions could also create additional administrative burdens for employers and unintended legal consequences.
EEO-1 Report Today
This year (and in years past), private employers with 100 or more employees and federal contractors (and certain first-tier subcontractors) with 50 or more employees are required to submit their annual EEO-1 report to the EEOC by September 30. The data collected highlights employee totals based on race, ethnicity, and sex within 10 job categories. This EEO-1 report requirement emanates from Title VII, which requires employers to make and keep records relevant to the determination of whether unlawful employment practices have been or are being committed, to preserve such records and to produce any reports to the EEOC as prescribed by regulation or order.
Proposed Revisions to EEO-1 Report
As revised and if approved, starting in 2017, the EEO-1 report would require employers (private and federal contractors) with 100 or more employees to continue reporting employee counts based on race, ethnicity, and gender within each job category – with a catch. For each of the 10 existing job categories, employers would now also be required to include aggregate W-2 earnings among 12 pay bands and hours worked so as to better identify pay discrimination, which is illegal under Title VII, the Equal Pay Act and Executive Order 11246. This would not apply to federal contractors with 50-99 employees.
Let’s look at an example for an employer who has 15 employees in the “Professionals” job category (which encompasses a wide variety of positions including HR specialists, accountants, IT analysts, and engineers). Under the current reporting requirements, the employer’s EEO-1 report would look something like this:
With the revised reporting requirement, that same employer’s EEO-1 report would now look something like this:
Notice anything different? But it gets worse. Employers would also be required to complete a nearly-identical but separate chart whereby they would insert the total number of annual hours that employees in each job category worked, separated by race, ethnicity, and gender within each pay band. While employers would not be expected to report anything more than the employee hours already collected, the EEOC is favoring an assumption that salaried employees work 40 hours per week for the purposes of completing the EEO-1 report, but has asked for input on this point. For a sample report provided by the EEOC, click here.
Potential Concerns for Employers
The EEOC has done a detailed analysis on how these EEO-1 report revisions will affect employers, but there is good reason why the EEOC is encouraging employers to publicly comment on the utility and burden of the revisions.
For one, while it is true that employers are required to issue W-2s to their employers, they typically do this at the end of the year. The EEO-1 report is due September 30. The EEOC has proposed three approaches for employers to gather W-2 data three months before schedule. These approaches may or may not work for employers depending on what type of automated payroll system is in place, the vendor the employer uses to process payroll, and an employer’s in-house information technology capabilities. The EEOC assumes that employers can make simple changes to their databases to import the W-2 data at any given time or that the “one-time burden of writing custom programs to import data” is a small and inexpensive one. While these assumptions may be true for the majority of employers, there is no one size fits all approach for employer payroll processes.
The EEOC plans to use the “within-job-category variation, across-job-category variation, and overall variation” data collected from the revised EEO-1 report to “discern potential discrimination.” If you glance back to the revised EEO-1 report sample chart above, on its face, it appears to show that the employer pays white males significantly more than males of other races and women of any race. What the chart does not show are the wide range of factors considered by employers when setting salaries, such as the employee’s education, years of experience, and seniority and the degree of skill/expertise required for the position. The EEOC has not explained how it will account for these factors when determining whether there is potential pay discrimination based on gender and/or race.
Employers should carefully examine their payroll systems to determine whether it is feasible to gather the additional pay and hours data in a fast and cost-effective manner. If you run into any concerns or have ideas about how the EEO-1 report revisions could have less of a burden on employers, the EEOC wants to know. You can submit your comments to the EEOC here – the deadline to do so is April 1, 2016, so time is of the essence if you want to be heard!