March 2, 2016
Practice Groups:
Global Government
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Labor, Employment
and Workplace Safety
EEOC Charges Forward with Obama Administration
Equal Pay Initiative
By Bridget A. Blinn-Spears
In a step likely to create additional burdens on employers, the Equal Employment
Opportunity Commission (“EEOC”) has proposed changes to employer reporting
requirements that would require most employers to provide significant additional information
about employee pay. Employers with 100 or more employees must currently complete the
EEO-1 report, which gathers demographic information broken down by job category from
private employers. The EEOC proposal would add a new section requiring disclosure of pay
information. In addition to using the data to evaluate employers’ pay practices, the EEOC
would share the data with the Department of Labor’s Office of Federal Contract Compliance
Programs (“OFCCP”), for that agency’s use in its wage discrimination enforcement efforts
relating to federal contractors. This proposal is the latest in a string of employment
enforcement initiatives spearheaded by the White House that place increased burdens on
employers but may promise limited benefits to employees.
New Requirements for Large Employers
All employers of 100 or more employees would be required to provide the new report
section, which would summarize pay data in a dozen pay bands broken down by the same
demographics and job categories in the current EEO-1 form. The reported pay information
would be based on income reported on the Internal Revenue Service W-2 form. Employers
would provide a 12-month lookback on W-2 income from any pay period between July and
September. The new section would also include information regarding the number of hours
worked by employees, but it would not gather any other data that might provide
nondiscriminatory explanations for differences in pay.
Wage Discrimination Laws
The EEOC appears to be seeking this information to assist it in enforcing equal pay laws.
Specifically, the EEOC is tasked with enforcing the Equal Pay Act, which prohibits sex
discrimination in compensation. The EEOC also enforces Title VII, which prohibits
discrimination based on race, color, religion, sex, or national origin. Both laws apply to
discrimination in wage payments. The EEOC also will be sharing the information with the
OFCCP, which enforces laws and executive orders prohibiting wage discrimination by
federal contractors. Under these laws, employers cannot pay men and women differently for
the same work, and they cannot pay employees differently because of their race, color,
religion, or national origin. But employers may legally differentiate pay on the basis of
legitimate, nondiscriminatory considerations, such as experience, tenure, seniority, job
performance, particular skills, or discipline history.
EEOC Charges Forward with Obama Administration Equal Pay Initiative
Existing EEO-1 and Wage Enforcement Efforts
The EEO-1 currently requires that federal contractors with 50 or more employees, and all
employers with 100 or more employees, annually report the race, ethnicity, sex, and job
category of their employees. The report divides race and ethnicity into seven categories, jobs
into 10 categories, and sex into two categories currently. The 10 job categories are:
• executive/senior level officials and managers;
• first/mid-level officials and managers;
• professionals;
• technicians;
• sales workers;
• administrative support workers;
• craft workers;
• operatives;
• laborers and helpers; and
• service workers.
Companies with multiple establishments are required to submit a separate report for each
location of the company with 50 or more employees. The EEO-1 report for the headquarters
of these multi-establishment companies must incorporate data for each establishment
employing fewer than 50 employees. Currently, EEOC investigations into wage
discrimination begin with a complaint alleging either disparate treatment of an employee or
disparate impact created by a facially neutral policy.
Goals for the New Report Section
According to the EEOC, the two agencies will use the new report data to “assess complaints
of discrimination, focus agency investigations, and identify existing pay disparities that may
warrant further examination.” The new report section will place a substantial burden on many
employers, not only to provide the information initially, but then to participate in investigations
triggered by statistical analysis of that information. Given the summary nature of the data to
be collected and the omission of information explaining the reasons for pay differences, real
questions exist as to whether the data to be collected will support any inference of
discrimination.
Both the EEOC and OFCCP have emphasized that the new data collection should assist
employers in their own compliance efforts. Companies have the advantage of examining
their wage data in the context of factors impacting wage payment, including experience,
tenure, seniority, job performance, particular skills, and discipline history. However, since the
agencies do not propose to collect this kind of information in the new report, even companies
that engage in appropriate self-monitoring may still be forced to provide pay data that would
trigger further inquiry from the EEOC or OFCCP. Such employers will be in a better position
to provide quick, thorough, and persuasive responses to the agencies, which may serve to
limit the burden of the investigations. But their self-monitoring and compliance efforts are
unlikely to prevent investigations from occurring.
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EEOC Charges Forward with Obama Administration Equal Pay Initiative
Assumptions About Burden on Employers
The EEOC’s estimates regarding the burden on employers created by the new report
assume that human resources information systems are already equipped to handle most of
the information gathering with minimal one-time changes to their reporting capabilities.
Because employers already manage the information necessary to generate a W-2 for each
employee, the EEOC estimate assumes it will not be burdensome to generate the same
basic information to report income for a different 12-month period (going back 12 months
from any pay period in July through September of the year in which the report is due).
Similarly, the report would require employers to provide only information they already
maintain regarding employees’ hours, on the assumption that because most paychecks
reflect a number of hours worked, most employers are tracking hours for most or all of their
employees. Employers are tracking the hours of employees who are paid by the hour and
not exempt under the Fair Labor Standards Act (“FLSA”), but they rarely track hours for
employees who are exempt and paid on a salary basis. Most employers only track the use of
paid time off by exempt employees, and payroll systems that do include a number of hours
for those employees usually reflect a 40-hour week regardless of how many hours are
actually worked. For exempt employees whose hours are not tracked, no potential
explanations for differences in their pay would be collected at all.
Action Items
The EEOC is seeking comments on the proposal through April 1, 2016. In addition to
feedback on the burden on employers to implement the new report and how to handle hours
reporting for exempt employees, the agency has also specifically sought comments to
enable it to “[e]valuate whether the proposed collection of information is necessary for the
proper performance of the Commission’s functions…” In light of the failure of the EEOC and
OFCCP to identify how they will be able to use the collected information to identify
discrimination rather than solely differences in pay, large employers may want to focus on
this “necessity” inquiry in considering whether to submit comments.
In addition to considering comments, large employers should consider examining their pay
practices and infrastructure to determine the additional burden on their EEO-1 reporting, as
well as the risk that their data would lead to false-positive statistical suggestions of wage
discrimination. This EEO-1 change would dovetail with proposed wage and hour regulations
the Department of Labor is expected to implement this summer, which will raise the salary
thresholds for certain exemptions from overtime pay under the FLSA. Given the increased
scrutiny on wage-related issues, as they await final regulations, all employers should
consider implementing proactive measures to identify existing problems in their wage
practices.
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EEOC Charges Forward with Obama Administration Equal Pay Initiative
Author:
Bridget A. Blinn-Spears
bridget.blinn-spears@klgates.com
+1 919 743 7350
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