United States: EEOC Proposes To Collect New Data On Pay

Last Updated: March 4 2016
Article by Shane E. Doucet and Michael D. Kans

Background: As part of the Obama Administration's initiative to advance equal pay policies, on January 29, 2016, the Equal Employment Opportunity Commission ("EEOC") released a proposal that would expand the information many private entities must report to the EEOC. Specifically, the proposed revision would require all employers with 100 or more employees (both private industry and federal contractors) to collect and report data on pay and hours-worked on their annual employer information reports (i.e. EEO-1 forms). Employers have previously reported to the EEOC the number of their employees by sex, race, ethnicity, and job category. However, it should be noted that the proposal is not a rulemaking and is a proposed revision of an existing EEOC information collection.

In 1964, Congress enacted Title VII of the Civil Rights Act (Title VII), which makes unlawful a wide range of discriminatory employment practices, including pay discrimination, because of race, color, religion, national origin, or sex. The EEOC enforces Title VII of the 1964 Civil Rights Act and the Equal Pay Act of 1963 that also prohibits sex-based wage discrimination between men and women if they work in the same establishment and perform jobs that require substantially equal skill, effort, and responsibility under similar working conditions.

In 2010, the EEOC joined other federal agencies such as the Department of Labor as members of President Obama's National Equal Pay Task Force to seek ways to improve enforcement of laws preventing pay discrimination. One of the recommendations the Task Force proposed was to improve pay data collection efforts to better support the enforcement division of the EEOC. The Task Force noted that "[p]rivate sector employers are not required to systematically report gender-identified wage data to the federal government." The Task Force claimed that "[t]his lack of data makes identifying wage discrimination difficult and undercuts enforcement efforts...[and] [w]e must identify ways to collect wage data from employers that are useful to enforcement agencies but do not create unnecessary burdens on employers." The Task Force stated that "[i]t has determined that there is no federal data source that contains private sector employer-specific wage data broken down by demographic category."

The EEOC subsequently commissioned a study by the National Academy of Sciences (NAS) that issued its findings on August 15, 2012 entitled Collecting Compensation Data From Employers. The EEOC asked the NAS, "to consider suitable data collection instruments, procedures for reducing reporting burdens on employers, and confidentiality, disclosure, and data access issues." Following the NAS Report, the EEOC commissioned an independent Pilot Study to identify the most efficient means to collect pay data completed in September 2015. That study formed the basis for the EEOC's current proposal. One of the conclusions from the Pilot Study was a recommendation for "collecting aggregate W-2 compensation information for the 10 EEO-1 occupation categories into pay bands, which would allow computation of within-occupation variation, across-occupation variation, and overall variation...[and] [i]n addition to the compensation data, total hours worked by each group should also be collected to increase the value of the data and to account for pay differences due to variation in the number of hours worked."

In its January 29, 2016 fact sheet on new equal pay policies, the Obama Administration stated that "[s]even years ago today, President Obama signed into law his first piece of legislation as President, the Lilly Ledbetter Fair Pay Act." The White House claimed that "[p]olicies that ensure fair pay for all Americans and that help businesses to attract the strongest talent can not only narrow the pay gap, but also boost productivity and benefit our economy...[y]et today, the median wage of a woman working full-time year-round in the United States is about $39,600—only 79 percent of a man's median earnings of $50,400." The Administration stated that "[w]hile the gap has narrowed slightly over the past two years, there is much more work to be done to ensure fair pay for all." Among the steps listed was the EEOC's proposal to expand reporting data on wages.

Proposed Information Collection: The EEOC asserts that the proposal "does not compel employers to collect new data but rather requires the reporting of pay data that employers maintain in the normal course of business." Starting in 2017, employers subject to the EEO–1 reporting requirement and that have 100 or more employees must submit pay and related information (referred to as Component 2) as part of the EEO–1report. The EEOC proposes to use total W–2 earnings as the measure of pay and will require the collections of the total number of hours worked by the employees. The EEOC seeks employer input with respect to how to report hours worked for salaried employees. One approach would be for employers to use an estimate of 40 hours per week for fulltime salaried workers. The EEOC is not proposing to require an employer to begin collecting additional data on actual hours worked for salaried workers, to the extent that the employer does not currently maintain such information. The EEOC in particular seeks comments on 1) "quantitative information about the burden associated with completing the currently approved EEO–1, as well as the anticipated estimated burden to also submit pay and hours-worked data, and (2) data regarding the estimated time that staff will spend to report the employer's pay and hours-worked data and the corresponding wage rates for that staff."

As this regulatory action is not a rulemaking, it is not subject to the notice and comment procedures of the Administrative Procedures Act. Rather, the Paperwork Reduction Act controls how the expanded collection of pay data would proceed. In terms of process, the Office of Management and Budget's Office of Information and Regulatory Affairs (OIRA) is the entity that approves or disapproves information collection by federal agencies. The EEOC stated its intention to submit a request to OIRA to conduct the expanded information collection. However, the EEOC must first evaluate the comments submitted and certify to OIRA that certain statutory requirements have been satisfied. Next, the EEOC must publish another Federal Register notice explaining it has submitted the certification to OIRA in order to gain approval to require the collection of the expanded universe of pay data. OIRA then has 30 days to render a decision. If OIRA disapproves the request, then the EEOC has no legal authority to require the submission of the expanded pay data. If OIRA approves, the request, the EEOC would have the authority to collect these data for up to three years.

In terms of possible enforcement actions using the new data if the EEOC's proposal is implemented, the EEOC stated that "[i] n the course of developing this EEO-1 proposal, the EEOC and Office of Federal Contract Compliance Programs (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 EEOC stated that it "and 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...[and] also anticipate developing software tools and guidance for stakeholders to support analysis of aggregated EEO-1 data." The EEOC and OFCCP "anticipate that the process of reporting pay data may encourage employers to self-monitor and comply voluntarily if they uncover pay inequities."

Moreover, during the rollout of the initiative, EEOC Chair Jenny Yang explained that the data collated "will also help employers evaluate their own pay practices so that they can prevent pay discrimination in their workplaces...[and] EEOC will publish aggregate data that will help employers determine if they are paying employees fairly, and if their pay is in line with regional and industry practices." She said that "[e]mployers will not report individual salary information about specific employees...[r]ather, they will report only the total number of employees by job category and demographic group who fall within 12 pay bands."

Public Comment Period: Written comments on this notice must be submitted on or before April 1, 2016. The EEOC has indicated is intention to finalize this proposal by September 2016.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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