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Others testify that government enforcement is critical to fight compensation discrimination
Several representatives of the HR, legal and business communities testified on March 16 that the Equal Employment Opportunity Commission’s (EEOC’s) proposed changes to the EEO-1 form would not help reduce the gender pay gap and would impose a severe administrative burden on employers.
The changes are designed to give the EEOC more information about compensation disparities between women and men. The commission says that collecting the additional data from employers would help the agency flag possible patterns or instances of discrimination and would assist companies trying to eliminate such disparities on their own.
The current EEO-1 form requires employers to report employment data by sex, race and ethnicity. The revised form would add information on total compensation as reported on W-2 forms. The data would be reported across 10 job categories and 12 pay bands. The proposal is broader than one previously announced by the U.S. Department of Labor, which would have applied only to federal contractors. The updated EEO-1 forms would have to be filed starting in 2017.
On average, women who work full time are paid about 79 cents for every dollar paid to men. The disparity is even greater for minority women. The pay gap is an issue in the presidential campaign and one that President Barack Obama has emphasized since he took office. Several speakers told the commission on March 16 that the reporting changes are essential.
“The pay gap is not a myth. It’s math,” said Lisa M. Maatz, vice president of government relations for the American Association of University Women. She said research shows that the discrepancy increases during a woman’s career. “Discussing wages continues to be a taboo in the modern American workplace. This is a major contributing factor to the pay gap,” said Maatz. “Shining a light on existing pay practices, gathering data about pay discrepancies, and giving experts and employers the information they need to correct the problem will help create parity between men’s and women’s wages.” Since 1881, the association has worked to improve the lives of women and their families.
“Women cannot afford to wait” for equal pay, testified Emily J. Martin, general counsel and vice president for workplace justice at the National Women’s Law Center. “Punitive pay secrecy policies and practices allow this form of discrimination not only to persist but to become institutionalized. Consequently, government enforcement and employer self-evaluation are critical to combat compensation discrimination.” The center lobbies for new laws to support women and families and urges strong enforcement of laws in support of women and their families.
Many Factors Affect Pay
However, a representative of the Society for Human Resource Management (SHRM) testified that while the intent of the data collection plan is admirable, compensation is too complex to be evaluated accurately based on the data the commission plans to collect.
“Collecting pay data in the highly aggregated manner proposed will not help identify unlawful pay discrimination,” said Janese Murray, vice president of diversity and inclusion at Exelon Corp., a Fortune 150 energy firm based in Chicago that employs about 30,000 people. Speaking on behalf of SHRM, she said that many factors affect compensation. “Over time, pay is increasingly influenced by an employee’s chosen career path—previous jobs, experience, education, performance and geographic locations, along with level of responsibility,” she said.
“Each EEO-1 job category includes a wide variety of job titles, for which vastly different rates of pay are provided based on a variety of legitimate, nondiscriminatory factors,” noted Murray. “In Exelon’s case, for example, the company reported just under 10,000 employees in the Professionals EEO-1 category on its 2015 EEO-1 reports. These individuals include many of Exelon’s engineers, lawyers, financial analysts, and HR and compliance professionals, along with our only pilot and a handful of meteorologists and many other unique positions.
“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 difference within this job category under the proposed data collection,” she continued.
Murray pointed out that that relying on W-2 income data will provide a faulty picture. “W-2 gross income includes other nondiscriminatory variables that may impact pay, including shift differentials, bonuses, commissions and overtime compensation,” she said. “While this data may provide the agency a broader view of pay practices, collecting this data will not allow the EEOC to evaluate comparable compensation data points.”
She criticized the commission’s proposal to collect the number of hours that employees work, noting that most organizations do not track the hours worked by overtime-exempt employees, whose compensation is based more on productivity than time in the office. Murray added that the reporting sought by the agency would create a significant administrative burden for employers, in large part because payroll and human resource information systems do not “talk to one another” automatically to generate the reports that the EEOC seeks.
In addition, “SHRM and its members are very concerned about the confidentiality of the compensation data the EEOC proposes to collect,” she stated. Many employees “would not be happy if their personal pay information was widely disclosed as a result of a data breach of the EEO-1 reporting system.”
‘Inherently Flawed Data’
Other speakers made similar arguments against the proposed changes.
Under the commission’s proposal, the data collection would produce numerous “false positives and false negatives” about potential gender wage bias, said David S. Fortney, co-founder of the law firm Fortney & Scott in Washington, D.C. It would be “garbage in, garbage out.”
The proposed report “uses inherently flawed data in an artificially created faux W-2, all for the purposes of creating distributions of pay on an overcomplicated chart with thousands of cells,” said Fortney. “Because of the substance of the data collected and the manner in which it is analyzed, the EEOC’s efforts will be fruitless.”
Speaking on behalf of the U.S. Chamber of Commerce, attorney Camille A. Olson urged the EEOC to go back to the drawing board. In light of the deficiencies outlined by speakers, “We request that the EEOC withdraw the proposed revisions and commence a cooperative effort with all stakeholders to deal with the issues,” she said.
“The EEOC has cavalierly refused to comply with its responsibilities under the Paperwork Reduction Act” by providing a faulty estimate of the time and expense necessary to compile and submit the required data, by failing to demonstrate how the data would aid law enforcement or policy development, and by omitting details about how the commission would safeguard salary information, testified Olson, a partner in the law firm Seyfarth Shaw in Chicago, Los Angeles and San Francisco.
Some speakers urged the EEOC to change the reporting period from a fiscal-year basis to a calendar-year basis, noting that W-2 data is generated in January. Some asked the agency to collect base pay information instead of W-2 compensation. Some suggested additional pay bands or job categories.
Michael J. Eastman, vice president of public policy of the Equal Employment Advisory Council, suggested that the EEOC test the proposed system with a voluntary pilot to determine whether the data will give the commission a useful tool to fight pay discrimination. The council provides guidance to member companies on complying with their equal employment opportunity and affirmative action obligations.
Commissioners did not debate the merits of the proposal at the hearing. However, their questions suggested a divide on the plan that largely mirrored that of speakers. Said Commissioner Constance S. Barker: “We need to make sure we’re not doing more harm than good” though the proposed changes.
The EEOC will accept written comments on the plan until April 1, 2016.
Steve Bates is a freelance writer in the Washington, D.C., area and a former writer and editor for SHRM.
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