Think you have a relaxing summer ahead of you? Think again. Thanks to a shocking court ruling from a federal court judge in Washington, D.C., the Equal Employment Opportunity Commission will be forcing most employers to turn over a mountain of compensation information from both 2017 and 2018 by Sept. 30. The information will need to be broken down by various demographic designations in order for the government to be able to quickly identify potential discriminatory wage gaps – most notably, disparities between the way men and women at each business are being paid for similar work.
Background: proposed rule scrapped
Historically, employers with 100 or more employees, and federal contractors with 50 or more employees, have been required to submit Employer Information Reports (EEO-1 reports) disclosing the number of employees in their employ by job category, race, sex and ethnicity on an annual basis. In 2016, the EEOC proposed changes to the EEO-1 report to require employers to include pay data and the number of hours worked for their workforces. The revised form was to be submitted by employers in 2018.
But once a new administration took over, the White House scrapped the revised EEO-1 report. The Office of Management and Budget (OMB) announced in August 2017 that it had significant concerns with the revised reporting requirements, among them that “some aspects of the revised collection of information lack practical utility, are unnecessarily burdensome, and do not adequately address privacy and confidentiality issues.”
Pay data requirement resurrected
The pendulum swung back in worker advocates’ favor in March of this year when a federal court judge in Washington, D.C., revived the revised EEO-1 report. She determined that the OMB did not have good cause to change course because it could not demonstrate that any relevant circumstances warranting the action had occurred between the time the proposed rule was finalized and the time the revisions were cast aside.
But that wasn’t the end of the tough news: after some more legal wrangling, the judge announced that employers should be on the hook for turning over two years’ worth of pay data. After all, the original plan from the Obama-era EEOC called for this information to be collected starting several years ago, and the judge believed the agency erred by putting a halt to this collection effort. So she gave the EEOC the option of either collecting pay data from both 2017 and 2018 information by the Sept. 30 deadline, or collecting 2019 pay data during the 2020 reporting period.
The EEOC responded in early May by picking its poison. It announced that EEO-1 filers should begin preparing to submit their pay data for calendar year 2017, in addition to data for calendar year 2018, by the Sept. 30 deadline. The EEOC also said that it expects to begin collecting this data by mid-July, which comports with its earlier announcement that the collection portal would be open for business and in a position to accept compensation information on July 15.
What should employers do?
The federal government several weeks ago filed an appeal, hoping to once again shelve the pay data reporting requirement. However, the EEOC confirmed that this Notice of Appeal does not pause the court’s orders or in any way alter EEO-1 filers’ obligations to submit pay data. “EEO-1 filers should begin preparing to submit Component 2 data,” the agency said on its website. So that is exactly what you should be doing.
First and foremost, in order to be in a position to comply with the new requirements, the EEOC has already announced that it will offer a series of training sessions and provide detailed information to employers so they understand their obligations in advance of the Sept. 30 due date. Be on the lookout for those in the coming weeks.
Meanwhile, begin by determining how your W-2 pay data will be split into the 12 pay bands required for each of the 10 EEO-1 categories. And you need to determine how you will report your hours worked, which is also a significant undertaking, where the data is likely tracked separately from the W-2 pay data information.
You should also make it a priority to review current pay systems and identify and address any areas of pay disparity. It is critical to take steps now to minimize increased scrutiny that may soon come your way. Ideally, you would work with legal counsel to conduct this initial review under the protection of the attorney-client privilege while you are assessing your workforce and the proper grouping for your employee population.
By conducting your own audit of pay practices, you will be able to determine whether any pay gaps exist that might catch the eye of the federal government if – or when – you are forced to turn over this information. You may have time to determine whether any disparities that may exist can be justified by legitimate and nondiscriminatory explanations, or whether you will need to take corrective action to address troublesome pay gaps. Due to the increased complications caused by Oregon’s own pay equity law, we strongly encourage you to get your attorney involved in this analysis early in the process.
Sorry if you had visions of dipping your toes in the sand or relaxing by the pool this summer. Instead, your next few months should be filled with pay data reports and compliance action in order to keep up with the latest legal development.
Rich Meneghello is a partner in the Portland office of Fisher Phillips.