By J. Drei Munar, Katherine P. Sandberg
Nov. 11, 2019
Nov. 11, 2019 is the last day for employers to submit reports detailing their employee compensation data to the Equal Employment Opportunity Commission.
Under the new reporting requirement, employers with at least 100 employees must report information to the EEOC regarding employee wages and hours worked by job category, race, ethnicity and gender. The EEOC is continuing to collect this data for 2017 and 2018 in advance of the Nov. 11 deadline, but the new requirement appears to be short-lived. On Sept. 12, 2019, the EEOC announced that after this year’s deadline, employers will no longer be required to submit compensation data, also known as “Component 2” data.
The EEOC first proposed this additional collection of pay data in 2016, and the reports were slated to be due Mar. 31, 2018. In announcing the new requirement, EEOC Chair Jenny R. Yang explained that the collection of pay data was meant to “assist employers in evaluating their pay practices to prevent pay discrimination and strengthen enforcement of our federal anti-discrimination laws.” The EEOC ultimately reversed course, explaining that the “unproven utility” of the pay data collection is “far outweighed by the burden imposed on employers that must comply with the reporting obligation.”
After Nov. 11, covered employers can return to the EEOC’s previous data collection practices, in which it has required employers to report demographic information (now called “Component 1” data) using the EEO-1 form. Since 1966, employers with more than 100 employees have been required to report the number of individuals employed by job category, race, ethnicity, and gender.
For federal agencies like the EEOC to collect information from the public, they need approval from the Office of Management and Budget, so the EEOC sought approval from the OMB to collect Component 2 data using a revised EEO-1 form.
In 2017, the OMB stayed the requirement to report Component 2 data. Thereafter, several advocacy organizations brought an action against the OMB to end the stay and reinstate the revised EEO-1 reporting requirements and collection of Component 2 data. On Mar. 4, 2019, the U.S. District Court for the District of Columbia ruled that the OMB failed to demonstrate good cause to uphold the stay and permitted the collection of Component 2 data using the revised EEO-1 form. While the Department of Justice filed an appeal on May 3, this did not stay the reporting requirement.
The initial deadline to collect Component 2 data was Sept. 30, 2019, but it has taken a substantial amount of effort for employers to provide the requested pay data information. Before the collection of Component 2 data was officially underway, the EEOC estimated that adding Component 2 data would increase the burden of EEO-1 reporting by 90 percent. Given the difficulty of completing this reporting, it comes as no surprise that the data collection and submission of the revised EEO-1 reports have not been seamless. As of Oct. 8, 2019, only 75.9 percent of covered employers had submitted the requested data by the initial deadline. This is far lower than the response rates for prior EEO-1 Component 1 data collections, which exceeded 90 percent.
It remains unclear how the newly collected Component 2 data will be used, especially since it only includes pay information for 2017 and 2018. The EEOC has stated that, as a general matter, EEO-1 data is used “for a variety of purposes including enforcement, self-assessment by employers, and research.” The EEOC has also published aggregated EEO-1 Component 1 data, in addition to periodic industry specific reports.
While any potential uses for the data are uncertain, the EEOC has implemented procedures “to ensure the protection of identifiable information of our survey respondents and maintain EEOC’s commitment to protect the data confidentiality.” This should allay concerns that an individual employer’s EEO-1 data could be made public.
As for lessons learned in the aftermath of this extensive data collection, employers could use the information gathered to conduct internal pay analyses. While employers will no longer be subject to this particular reporting requirement, prudent employers will still gather pay data by job category, race, ethnicity and gender to take proactive measures to avoid pay equity lawsuits.
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