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Déjà vu? Revised EEO-1 Report to Replace Proposed Equal Pay Report for Federal Contractors
Government Contracts Issue Update
On February 1, 2016, the U.S. Equal Employment Opportunity Commission (EEOC) published a proposed revision to the Employer Information Report (EEO-1) that would require employers, including federal contractors, with 100 or more employees to report pay information beginning in 2017. 81 Fed. Reg. 5113 (Feb. 1, 2016). For federal contractors, this proposed revision by EEOC may conjure a feeling of déjà vu. Back in 2014, the U.S. Department of Labor’s (DOL) Office of Federal Contract Compliance Programs (OFCCP) similarly proposed requiring large contractors to submit compensation data in an annual Equal Pay Report. 79 Fed. Reg. 46562 (Aug. 8, 2014). Fortunately for contractors, the proposed EEO-1 revision moots the 2014 proposed rule because OFCCP plans to utilize EEO-1 pay data instead of requiring a separate Equal Pay Report. As with that now-moot 2014 proposal, the intent of the revised EEO-1 is to assist EEOC and OFCCP in identifying possible pay discrimination and assist employers in promoting equal pay in their workplaces.
W-2 Earnings Data and Pay Bands
Currently, the EEO-1 requires federal contractors with at least 50 employees and private employers with at least 100 employees to report annually the number of individuals they employ by job category, race, ethnicity, and sex for any pay period prior to September 30. Beginning in 2017, the proposed EEO-1 change would require large contractors and private employers with 100 or more employees to also submit data on employees’ total W-2 earnings and hours worked. Through the use of W-2 earnings data, EEOC contends that employers will be able to provide pay data that they already maintain in existing human resource information systems (HRIS), without needing to collect any new data. Unlike the proposed Equal Pay Report, the revised EEO-1 proposes to aggregate pay data in 12 pay bands for the 10 existing EEO-1 job categories. For example, an employer would report on the EEO-1 that total hours worked for 10 African American men who are Craft Workers in the second pay band ($19,240-$24,439) is 10,000 hours. EEOC maintains that the use of pay bands will allow the agency and OFCCP to compute within-job-category variation, across-job-category variation, and overall variation, thus allowing the agencies to discern potential discrimination while preserving confidentiality.
Hours Worked and Burden Statement
The new requirement to collect information on hours worked will, in theory, allow EEOC and OFCCP to analyze pay differences by taking into account periods of time when employees were not fully employed, such as when an employee worked part time or for less than the full year. EEOC maintains that this will impose a minimal burden on employers because total hours worked data is maintained by almost all payroll systems. EEOC specifically seeks detailed employer input with respect to how to report hours for salaried employees. The agency notes that it is not proposing to require an employer to begin collecting additional data on actual hours worked for salaried workers, and proposes an approach where employers use an estimate of 40 hours per week for full-time salaried employees.
EEOC also seeks employer input on its calculation of the burden of complying with the proposed revision. The agency estimates that the total burden for filers submitting the revised EEO-1 amounts to 6.6 hours for reading instructions and collecting, merging, validating, and reporting the data electronically for a cost of $159.92 per respondent (using the Bureau of Labor Statistics administrative support hourly rate of $24.23). In addition, there is an estimated one-time implementation burden cost for submitting the new pay and hours worked data amounting to $377.76 per respondent. This calculation is based on the one-time costs for developing queries related to the new data in an existing HRIS, which is estimated to take 8 hours per filer at a wage rate of $47.22. For public comment, EEOC encourages employers to provide: (1) quantitative information about the burden associated with completing the current EEO-1, as well as the anticipated burden to submit the new pay and hours worked data, and (2) data regarding the estimated time that staff will spend to report the new data and the corresponding wages for that staff. Comments on the proposed EEO-1 revisions are due by April 1, 2016.
EEOC and OFCCP maintain that the agencies’ will protect the pay data as required by law. EEOC holds EEO-1 data confidential as required by Section 709(e) of Title VII. It does not publish individual EEO-1 reports and publishes only aggregated EEO-1 data in a manner that does not reveal any particular employer’s or employee’s information. EEOC asserts that it will examine the rules for publishing aggregate data to ensure that tables with small cell counts–i.e., the pay for one or two Hispanic or Latino women who are Executive/Senior Level Officials and Managers – are not made public. OFCCP will likewise protect the contractor data it receives to the maximum extent permitted under the Freedom of Information Act (FOIA).
Implications and Preparation
Like OFCCP’s 2014 Equal Pay Report and 2011 data collection tool proposals, the proposed EEO-1 fails to address some key issues. The proposal specifically states that EEOC and OFCCP plan to use the pay data to assess complaints of discrimination, focus agency investigations, and identify existing pay data to assess complaints of discrimination. However, the collection and analysis of raw W-2 earnings data, which does not include information on factors such as education, experience, or performance that may affect pay, may lead to “false-positive” findings of pay disparities. These false-positives would likely lead to increased, and ultimately needless, OFCCP compliance reviews, requiring a significant effort by contractors to defend. In regard to confidentiality, although EEOC and OFCCP maintain that they will protect compensation data to the maximum extent possible, there is no guarantee that the data will be exempt from a FOIA request or data breach. Pay data in a competitor’s hands could cause significant commercial harm.
In light of the Obama administration’s emphasis on fair and equal pay, contractors should review their HRIS to prepare the systems to track and report the newly required data. The proposed EEO-1 Form to collect compensation data is available on EEOC’s website at http://www.eeoc.gov/employers/eeo1survey/2016_new_survey_2.cfm. Contractors should also consider conducting a self-audit of their compensation data, practices, and manager training with outside counsel under the attorney-client privilege to identify and resolve any potential compensation discrimination exposure.