• Wanted: Your Company's Workforce Pay Data - EEOC Proposes Adding Compensation Data to Annual EEO-1 Report
  • March 8, 2016 | Author: David J. Oberly
  • Law Firm: Marshall Dennehey Warner Coleman & Goggin, P.C. - Cincinnati Office
  • On January 29, 2016, the United States Equal Employment Opportunity Commission (EEOC) released a proposed revision to the Employer Information Report (EEO-1) that would add employee pay data as an additional reporting requirement beginning in September 2017. The proposal is highly controversial, as it will require private employers for the first time to publicly announce pay data.

    The EEO-1 already requires private sector employees with over 100 employees to provide employment data that is intended to serve as a demographic snapshot of an employer's workforce. The pay data proposal would add aggregate data on pay ranges and hours worked to the EEO-1 reporting requirements. Under the proposal, employers would be required to report by race, ethnicity, and gender their workforce's total hours worked and W-2 earnings. The EEOC would then utilize this pay data to assess complaints of discrimination, focus agency investigations and identify existing pay disparities that may warrant further examination. In addition, the EEOC proposal also seeks to require that all EEO-1 reports be filed electronically starting in 2017.

    Employers are well within reason to not be pleased with the EEOC's proposed regulations, which are estimated to apply to more than 63 million employees nationwide. For starters, the proposal would substantially increase the data reporting burdens on employers, who would be required to implement new data management systems not only to collect and document data concerning compensation levels and hours worked, but also to extract that data and report it to the Commission in order to comply with the new electronic reporting requirements. More importantly, these new reporting requirements will almost inevitably lead to more charges of pay discrimination by employees, who will be able to utilize this abstract, summary data to claim that they are being compensated below industry standards.

    As proposed, the data will not be presented in any context and will not take into account any key legally-accepted business considerations or other factors to explain the compensation disparities, such as education, experience, seniority, degree of responsibility and performance. As a result, it is likely that employers will see an uptick in the amount of claims filed by employees alleging discrimination on the basis of pay. Moreover, the data collected by the new pay regulations will also strengthen the EEOC's ability to affirmatively file actions without identifying individual plaintiffs.

    While the new proposed pay data reporting regulations have yet to be approved or implemented, employers should begin contemplating what impact the new requirements might have on their existing business operations should the proposal go into effect. At this time, employers should begin looking at measures that will need to be implemented in order to ensure the ability to collect, document and report pay data according to the new requirements (which includes electronic submission of EEO-1 reports). In addition, employers should assess their current pay practices in order to evaluate whether any potentially troublesome compensation disparities exist.

    Employers are well advised to conduct internal audits of their pay practices this year in order to identify any pay gaps that might trigger a response from the EEOC in connection with the new pay reporting regulations. Ideally, these audits should be conducted with the assistance of legal counsel, which will enable the employer to shield any arguably negative analyses or findings through applicable legal privileges. Moreover, done properly, these audits will allow employers to cure any potentially problematic pay practices prior to September 2017 when the new requirements could go into effect. At a minimum, employers should review their own pay data to ensure that they are fully capable of providing reasoned and non-discriminatory justifications for any and all tangible pay inequalities among similarly-situated employees in their workforce.