EEO-1 Pay Data May Be Garbage In

By Allen Smith Feb 1, 2016
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Equal pay for women and men sounds like a worthy cause. But some management attorneys say that the Equal Employment Opportunity Commission’s (EEOC’s) newly proposed pay data requirement is not the way to level the two genders’ salaries.

Management attorneys are concerned that the proposed requirement will not highlight meaningful differences in pay and will instead send enforcement authorities on wild goose chases.

Federal Initiative

The White House and the EEOC vowed to keep fighting unequal pay at work by proposing that EEO-1 reports, due on or before Sept. 30, 2017, will have to include pay data by gender, race and ethnicity. The Department of Labor is partnering with the EEOC on the proposal.

The announcement was made on Jan. 29 in conjunction with the White House’s commemoration of the seventh anniversary of the Lilly Ledbetter Fair Pay Act. The Fair Pay Act requires that the 180-day statute of limitations for filing an equal-pay lawsuit resets with each new paycheck that demonstrates discrimination. The act was the first legislation President Barack Obama signed into law—a strong signal of how seriously he takes pay discrimination.

The pay data would be reported across 10 job categories and by 12 pay bands, and will not require the reporting of the specific salary of each individual employee. The proposal is broader than one previously published by the Department of Labor, which would have applied only to federal contractors.

“Collecting pay data is a significant step forward in addressing discriminatory pay practices,” said EEOC Chair Jenny Yang. “This information will assist employers in evaluating their pay practices to prevent pay discrimination and strengthen enforcement of our federal anti-discrimination laws.”

“We can’t deliver on the promise of equal pay unless we have the best, most comprehensive information about what people earn,” said Secretary of Labor Thomas Perez. “We expect that reporting this data will help employers to evaluate their own pay practices to prevent pay discrimination in their workplaces. The data collection also gives the Labor Department a more powerful tool to do its enforcement work.”

Meaningless Data?

But, the pay data information “will not be very meaningful,” said Alissa Horvitz, an attorney with Roffman Horvitz in McLean, Va. ”Employers are concerned it will be used for audit or review,” which wouldn’t be fair since the EEO [equal employment opportunity] categories are very broad.

A vice president more than two levels down from the CEO may be grouped in the same “first-level officials and managers EEO-1 category” as a front-line, first-level supervisor, Horvitz said. Of course their pay will not be the same.

The director of engineering operations and the director of human resources may both be directors, but different levels of experience or different amounts of education may be required for the two jobs. Pay may differ based on performance or seniority. In addition, there may be different average pay rates for their positions in their respective communities. Putting a tally count for the female director of engineering operations in pay band 12 in the first-level officials and managers EEO-1 category and putting another tally in pay band 8 for the male director of human resources has no utility insofar as uncovering pay discrimination is concerned.

Greg Keating, an attorney with Choate, Hall & Stewart in Boston, questioned the validity of using W-2s to compare pay. Two factory workers may make different amounts of pay for nondiscriminatory reasons. For example, one might work every shift differential or overtime opportunity that is available, Keating explained.

However, Leigh Nason, an attorney with Ogletree Deakins in Columbia, S.C., thinks there may be some utility in the data. She advised employers to closely scrutinize who gets overtime to make sure it’s not given to men more than to women, or to whites more than to blacks or Hispanics. She agreed there may be a perfectly nondiscriminatory reason for one person to get more overtime than another, such as if one individual is uninterested in it because of a need to be at home with kids or if a person has a second job, for example.

Look at promotions as well, Nason added, to see if there are any discriminatory patterns. But she said that the data the EEOC is proposing to collect will likely result in “a lot of false positives.”

Confidentiality, Paperwork Concerns

Keating also expressed concern that the confidentiality of the pay data will not be adequately protected. While the EEOC has promised it will not divulge the pay data, he said that the Office of Federal Contract Compliance Programs has let other information it has collected be obtained through the Freedom of Information Act (FOIA). “There isn’t any concrete assurance by the agency” on confidentiality, Keating said.

In addition, while getting the pay data information may not be difficult, filling out all of the EEO-1 reports for each of an employer’s sites by pay band will be more burdensome for employers with multiple locations. Horvitz said that having just a little more than a year to prepare for this requirement may not be enough time to comply.

The EEOC believes that there would be relatively little burden to reprogram human resource information systems (HRIS) database output because “HRIS software developers are familiar with using pay bands” among state and local government filers who complete an EEO-4, Horvitz noted.

The logic appears to be that if there are HRIS developers who have done this in the EEO-4 space, it should be relatively easy for the rest of the EEO-1 filing universe to do this. The EEOC calculates that there are 60,886 private-industry employers with 100 or more employees, and it will take each one 6.6 hours to read the new instructions and file the new reports.

There is no estimate of the cost of reprogramming and testing the output.Moreover, there may be 60,886 private-industry employers, but many may not use batch upload to submit their data. Instead, they may enter the data cell by cell. Horvitz encourages employers to submit comments on the actual anticipated burden of having to program and test their systems to produce an output in this new format, as well as the time to file under the new framework.

The EEOC is effectively trying to replace a recent proposed rule issued by the Office of Federal Contract Compliance Programs requiring compensation data reports by government contractors, and broadening it to apply to all employers with more than 100 employees, noted Connie Bertram, an attorney with Proskauer in Washington, D.C.Bertram observed that “the EEOC has said it is not requiring any employer with fewer than 100 employees to provide the new pay information. Thus, it is unclear what, if any, compensation information contractors with less than 100 employees will be required to disclose.”

In any event, “There will be a big uptick in potential liability” if the pay data requirement stands, Keating said.

“Industry groups are likely to focus hard on this and identify why it’s not a workable way to go.”

Allen Smith, J.D., is the manager of workplace law content for SHRM. Follow him @SHRMlegaleditor.

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