León Cosgrove

Employers Concerned about Proposed Expansion of EEO-1 Reporting

By: John D. Bosco

imagesRecently, the U.S. Equal Employment Opportunity Commission (EEOC) made public a proposed revision to the annual Employer Information Report (EEO-1) that would require employers with 100 or more employees to collect and report to the EEOC workers’ pay ranges and hours worked. In its news release, the EEOC said collecting the additional data “will assist the agency in identifying possible pay discrimination and assist employers in promoting equal pay in their workplaces.”

Many employers fear that the new pay and hours reporting requirements will vastly increase the burden of EEO-1 reporting, which already requires data on employees’ race, ethnicity, sex, and job category. Among employers’ most pressing concerns are that the aggregate data collected will, in fact, be useless and even misleading for the EEOC’s stated purpose of gaining “insight into pay disparities across industries and occupations and strengthening federal efforts to combat discrimination.”

Under the Paperwork Reduction Act (PRA), the EEOC is seeking three-year approval of the revised EEO-1 from the Office of Management and Budget (OMB). 44 U.S. Code § 3501 requires the OMB to consider “whether the data request is the least burdensome possible and whether the information shall have practical utility.”

If approved by the OMB, the proposed revisions to the EEO-1, available on the Federal Register’s website, would take effect with the September 2017 reporting period.

The EEOC took public comments from February 1st to April 1st, and also heard testimony on the pending changes at a March 16th public meeting. Among those at the public hearing criticizing aspects of the proposed changes were representatives of the U.S. Chamber of Commerce, the Society for Human Resource Management, the National Association of Manufacturers, and the National Federation of Independent Business.

In general, critics argued at the March 16th hearing that the revised EEO-1 fails OMB’s Paperwork Reduction Act test that the changes proposed be “the least burdensome,” and provide “practical utility.” Detailed criticisms of the expanded EEO-1 reporting proposal falls into several categories, including: problems with collecting and reporting aggregate pay data from employees’ W-2s; the difficulty of collecting and reporting hours worked data for exempt employees whose work hours are not tracked because they are salaried; concerns about the identifiability of private employee pay data; and concerns about the EEOC’s potential misuse of data that will be chilling and costly for employers.

Indeed, the National Federation of Independent Business (NFIB) has claimed that the “expanded form would contain over 3,500 data cells. Every employer covered by the report will need to spend significant time and money figuring what and how to report . . . While NFIB and its members are committed to supporting workplaces that are free from discrimination, we do not believe that the additional reporting burden imposed on employers will identify illegitimate discriminatory pay practices. Instead, we are concerned that the revised EE0-1 will put more employers at risk of investigations and lawsuits over legal disparities in pay in addition to exponentially increasing employers’ reporting burden.”

The U.S. Chamber of Commerce similarly found that “[t]he impact of the new EEO-1 report would be substantial, both in the millions of hours that private employers would be required to spend completing the new report and in the false results that may be generated. . . . In practice, it would impose enormous burdens and risks on employers who base complex compensation decisions on factors other than membership in a particular EEO-1 (protected) category . . .

“The EEOC is requiring the combining of completely dissimilar jobs to determine if there is pay discrimination. For instance, the proposed revised forms will require a reporting hospital to combine lawyers, doctors, nurses and dieticians—all grouped as ‘professionals’—to somehow determine whether there are pay disparities based on gender, race or ethnicity. No law permits comparisons of such diverse workers to prove discrimination.”

According to the Society for Human Resource Management, “each EEO-1 job category includes a wide range of job titles, for which vastly different rates of pay are provided based on a variety of legitimate, nondiscriminatory factors. It goes without saying that the pay for each of these positions, even though they are within the same broad EEO-1 job category, varies significantly because these individuals perform very different work. However, there is no way for the EEOC to understand this legitimate reason for pay differences within this job category under the proposed data collection.”

While salary variances may be completely legitimate, the new reporting requirements are likely to lead to an increase in EEOC investigations. Accordingly, employers should be proactive in addressing pay disparities and regularly auditing pay practices to minimize the risk of an EEOC enforcement action.

 

JohnBosco_BW_WebJohn D. Bosco is a partner in the Dallas, Texas, office of León Cosgrove LLC who focuses his practice on the defense and trial of complex labor & employment and accessibility matters in state and federal courts across the country. Jbosco@leoncosgrove.com