EEOC Issues Revised EEO-1 Proposal
The EEOC published its revised proposal for the new EEO-1 report today. The revised proposal came after extensive, and polarized, comments on the EEOC’s prior proposal this Spring. The prior proposal revised the existing EEO-1 report to require disclosure of data on pay ranges and hours worked in addition to the already required reporting on workforce profiles by race, ethnicity and gender. The revised proposal released today still requires reporting of this data. The EEOC has not changed course on its plan to use the data to identify discriminatory pay practices and target companies for investigations and class action equal pay lawsuits – without having to identify an injured party plaintiff. The primary change in the revised proposal is that the first date by which employers will have to submit the new EEO-1 report has been moved from September 2017 to March 31, 2018. In addition to allowing more time for employers to prepare for the new report, the EEOC made this change to simplify reporting by allowing employers to use existing W-2 data from the 2017 calendar year for the 2018 report. The EEOC also provided options for calculating “hours worked” for exempt employees, and will not require employers to collect hours worked for exempt workers if they do not already track those hours.
The revised proposal does not provide further clarification to address employers’ concerns that the EEOC has not provided clear guidance on how the data will be analyzed. Employers also voiced legitimate concerns about the data being misinterpreted, since the summary wage data will be reported using ten broad and generic job categories that group together employees with very different job descriptions, responsibilities, qualifications, experience, etc. – all legitimate reasons for pay disparities. Also, employers should take note of EEOC Commissioner Jenny Yang’s recent public statements cautioning employers against using salary negotiations or prior salary as an explanation for gender pay gaps.
Employers and others have until April 15, 2016, to submit written comments on the revised proposal. However, it is unlikely there will be substantive revisions. Employers can expect an increase in individual and class action litigation once the EEOC starts collecting the data in the new EEO-1 report. The EEOC has repeatedly stated that enforcement of equal pay laws is an agency priority. In addition, many states have either passed, or are considering, new aggressive equal pay laws, following the lead of California’s Fair Pay Act. As a result, employers will be well-served by conducting privileged internal audits now to assess whether significant pay disparities exist. Given that the 2018 EEO-1 report will be based on 2017 pay data, employers should ideally conduct audits prior to making final compensation decisions effective in 2017. There may be legitimate, non-discriminatory reasons for pay disparities, but employers must understand those reasons in order to explain them to the EEOC. In addition, proactive audits allow employers the opportunity to address unintended pay disparities for workers in substantially similar jobs before the reporting obligations become effective.