EEOC Seeks to Mandate Reporting of Employee Pay
February 4, 2016
Last Friday, the Equal Employment Opportunity Commission (EEOC) announced a proposed significant revision to the required Employer Information (EEO-1) Report filed annually by many employers. Under the proposed change, employers with more than 100 employees would be required to collect and submit data on annual employee pay and number of hours worked on their EEO-1s. This requirement would apply to both private employers and federal government contractors and would take effect with the 2017 reporting cycle. Employers have until April 1, 2016 to comment on the proposed revision.
Currently, employers with 50 or more employees file an annual EEO-1 report in which they identify the gender and self-identified races of their employees, broken down by 10 job categories. The proposed new requirement would add a second survey, which the EEOC calls “Component 2.” EEO-1 filers with 50 to 99 employees would continue to complete the current survey, called Component 1. Employers with 100 or more employees will submit pay and hours-worked data under Component 2 in addition to the demographic and job category data under Component 1.
A sample Component 2 form is found here. This survey takes the current 10 job categories and creates 12 different income ranges within each category. The lowest range is $19,239 and under; the highest range is $208,000 and over. Employers will then count and report the number of employees in each pay band of each category, as well as the total hours worked by those employees.
For example, if an employer reports 10 Asian male employees in the sales category on the Component 1 form, then the employer will breakdown into which of 12 income brackets these 10 employees fall. If, for instance, nine of those male employees fell in the $39,000 to $49,919 range and one superstar fell in the $128,960 to $163,799 bracket, the employer would write nine on the first part of the survey, and then add the total hours for those nine employees. For the remaining superstar, his total hours would be reported.
The EEOC has asked for employer input with respect to how to report the number of hours worked for salaried employees. The EEOC has offered that one approach where employers use an estimate of 40 hours per week for full-time salaried workers. The EEOC noted that it did not intend to obligate employers to track the hours of salaried employees. However, taking the sample above, if the sales individuals were salaried, taking an approach where all salaried employees are assumed to work 40 hours a week may not take into consideration that the superstar sales person put in, on average, 55+ hours per week. As to the type of income employers are to report, the EEOC has proposed that the measure will be “total W-2 earnings.” As W-2 data is often not compiled until the end of the calendar year, and EEO-1 reports are due on September 30th, the EEOC put forth the following as possible approaches employers could take:
- W-2 data can be imported into a human resources information system (HRIS), and a data field can be established to accumulate W-2 data for the EEO-1;
- Employers could obtain pay information by utilizing quarterly payroll reports for the previous four quarters; or
- For employees that outsource their payroll, employers could write a custom program to import the data from their payroll companies into their HRIS systems.
The EEOC estimates that filers who are required to complete both Components 1 and 2 would spend approximately 6.6 hours of employee time in completing the form. Many, if not most, employers would likely disagree.
The EEOC has made clear that the goal behind Component 2 is to aid in the identification of pay disparities, and the agency even timed its announcement of the new proposed requirements for the seventh anniversary of passage of the Lilly Ledbetter Fair Pay Act. However, as commentators have noted, this information would be provided to the EEOC in the absence of any pending investigation and could make an employer a target for investigation even without any employee charge. Also, the requested data does not account for considerations such as shift or pay differentials or the relative experience, education, or even job positions and responsibilities within each job category. Without context, the collected information may, in the end, be meaningless.
The proposed changes are available for review online, and employers and other members of the public have until April 1, 2016 to submit comments.
