Can the EEOC Be Persuaded to Keep Collecting Pay Data?

 

Lisa Nagele-Piazza, J.D., SHRM-SCP By Lisa Nagele-Piazza, J.D., SHRM-SCP November 21, 2019
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Should the Equal Employment Opportunity Commission (EEOC) continue collecting EEO‑1 Component 2 pay data, broken down by job category, race, sex and ethnicity? Worker advocates and business groups still disagree on the answer.

At a public hearing Nov. 20, panelists from various backgrounds all agreed that pay equity is an important issue for the government, employers and workers alike, but they disagreed on how to address the wage gap and eliminate discriminatory pay practices.

EEOC Commissioner Victoria Lipnic noted that the government's enforcement resources are scarce, and having a full understanding of both the burden and the benefit of collecting pay data "is something that will be useful to all of us."

Mixed Reviews

Earlier this year, a federal judge ordered the EEOC to collect pay data for 2017 and 2018 from certain employers. However, in September, the agency announced that it doesn't plan to collect EEO‑1 Component 2 data in the future. The EEOC still intends to follow its longtime practice of collecting Component 1 data, which lists the number of employees by job category, race, ethnicity and sex.

The agency proposed the changes Sept. 12 in its Paperwork Reduction Act Notice.

The Center for Workplace Compliance (CWC), an employer association, "strongly supports" the EEOC's proposal to continue collecting Component 1 data and to stop collecting Component 2 data, according to Michael Eastman, CWC's senior vice president of policy and assistant general counsel. "Component 1's structure, content and filing options have worked remarkably well over the years," he testified.

However, he said, Component 2 isn't an effective enforcement tool. "In short, Component 2 has imposed a significant and burdensome data-collection obligation on employers that will likely have little to no utility whatsoever."

Jocelyn Frye, a senior fellow with the Women's Initiative at the Center for American Progress, disagreed. "The requirement to collect pay data through Component 2 was among the most important equal pay reforms adopted during [President Barack Obama's administration] to strengthen equal pay enforcement and promote greater employer accountability," she said in her written testimony.

Katica Roy, CEO and founder of Denver-based Pipeline Equity, told SHRM Online she thinks that ongoing collection of pay data—and ultimately closing the gender pay gap—is an economic opportunity. Pipeline developed a technology platform to improve gender equity in the workplace. Roy noted that women make up about half of the workforce and college graduates. "We could expand the U.S. economy … if we closed the gender-equity gap," she said.

Difficult Task for HR

For EEO-1 Component 2, employers must report wage information from Box 1 of the W‑2 form and total hours worked for all employees by race, ethnicity and sex within 12 proposed pay bands.

Josh Mitchell, Ph.D., an economist with Welch Consulting in Los Angeles, said collecting these data is difficult for employers. Some data may be housed in the human resource information system, and other data may be stored in a payroll processing system that is managed by a third-party service provider.

Additionally, he said, the W-2 Box 1 annual taxable wage "is ill-suited for comparing employee pay rates, because it conflates employer and employee decisions and ignores employment changes that affect compensation."

Lynn Clements, director of regulatory affairs at Berkshire Associates, an affirmative action compliance service in Columbia, Md., agreed. She said that an employee's W‑2 earnings over a 12-month period can be affected by many events that are out of the employer's control, such as benefit elections and deductions and leaves of absence. "That the W-2 earnings can be so heavily impacted by employee choice completely undermines the stated purpose of identifying race- or gender-based pay disparities that occur as a result of employer pay decisions," she testified.

Furthermore, she said, collecting Component 2 data is difficult for employers because it requires them to "gather and synthesize what happened to employees over a 12-month period." In that time, employees may have been newly hired, promoted, transferred or reclassified from exempt to nonexempt. The required assumptions and manipulations "increase the burden on employers while simultaneously decreasing the utility of the reported data," she said in her written testimony.

Regulatory Agenda Item

In the federal government's Fall 2019 Regulatory Agenda, which was released Nov. 20, the EEOC announced that it is considering a rulemaking "that may include a new reporting requirement by which employers would submit pay data or related information as reasonable, necessary or appropriate" to enforce Title VII of the Civil Rights Act of 1964 and the Equal Pay Act.

The agency would seek public comment about how the data collection may help its enforcement efforts, as well as appropriate methods to collect data and the burdens on employers. The agency noted that many states and cities have created models for collecting data and promoting employer compliance and transparency. The EEOC said it "plans to learn from those state and local efforts."

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