According to the Equal Employment Opportunity Commission (EEOC), “Workers depend on the EEOC to advance opportunity and freedom from workplace discrimination. Although much progress has been made in the past 50 years, pay disparities continue to be a problem in the American workplace…studies show that significant pay gaps exist in the U.S. workforce linked to sex, race, and ethnicity. Even when controlling for other factors, workplace discrimination is an important contributing factor to these pay gaps. Eliminating the pay gap would reduce the number of working poor, improve the financial security of many families, and strengthen the nation’s economy.” To that end, in 2016, the EEOC published a proposal to collect pay data, which it stated “marked a significant step forward in addressing discriminatory pay practices. This information will assist employers in evaluating their pay practices to prevent pay discrimination and strengthen enforcement of federal anti-discrimination laws.”
On July 14, 2016, the EEOC published its revised proposal to collect summary pay data by race, ethnicity, and sex from employers that already file the EEO-1 report. The initial proposal was published in February and after a 60-day comment period, the EEOC revised the proposal including changing the timeline to allow employers to use existing W-2 reports during the first year of reporting under the new amendments. Under the proposed amendments, employers who already file an Employer Information Report (EEO-1) will be required to also report pay to U.S. employees by gender, race, and ethnicity, across 12 pay bands, by March 31, 2018.
The proposal would require employers with 100 or more employees to report aggregate W-2 income by sex, race, ethnicity, and job group. Consistent with current practice, federal contractors with fewer than 50 employees and private employers with fewer than 100 employees will not be required to submit an EEO-1 report. The EEOC has stated that the information provided by the W-2 in combination with the existing EEO-1 infrastructure will provide valuable insights across regions, industries, and occupations, as well as gender, race and ethnicity. In addition, in response to comments, the EEOC has proposed calendar year reporting and moved the 2017 EEO-1 reporting due date to March 31, 2018 because this shift will help to reduce costs for employers by allowing them to use W-2 wage data, already compiled for tax purposes, and provides a full 18 months for the transition to the new reporting requirements.
The EEOC concluded that pay discrimination is complex, is influenced by many factors, and is not limited to base pay as such using W-2 income is important because supplemental pay such as bonuses, overtime, and premium pay, is more and more central to compensation in the U.S. and it is included in W-2 income but not in base pay. According to the proposal, employers would report summary W-2 income by sex, race, ethnicity, and job group: Employers would tally the number of employees in 12 pay bands for each EEO-1 job category. For each pay band, employers would enter the number of employees whose W-2 pay for the calendar year falls in that band. Employers would report summary pay data. Employers would not report individual pay or salaries. By utilizing the same wage information employers’ file for tax purposes, the EEOC states that it is defining pay consistent with existing W-2 pay practices. The revised pay data collection proposal will be subject to a new 30-day comment period, which ends on August 15, 2016. The EEOC is planning to issue its final EEO-1 form revisions by September 30, 2016.
With access to this new data, it appears that the EEOC will increase its enforcement efforts based on this new information. As such, employers should carefully review and analyze their current pay practices to ensure they are able to defend against claims of pay inequality. In order to determine fully whether such disparities exist, employers will need to review individualized employee data and take into account factors that may explain differences in pay. If disparities cannot be explained by legitimate business reasons, employers should work with counsel to determine if pay adjustments or modifications to policies are necessary to avoid an EEOC investigation for pay discrimination.
Joette S. Doran has her law practice in Hoffman Estates. She concentrates in employment law and handles employment law actions in state and federal administrative agencies and courts. She was a former Co-Chair of the NWSBA Employment Law Committee, is a Member of the Board of Governors and is the Chair of the Women’s Law Committee. For more information please visit her website at www.joettedoran.com.