Closing the Wage Gap: Equal Employment Opportunity Commission Proposal to Collect Wage Data from Large Employers

February 1, 2016Articles

Starting September 30, 2017, the U.S. Equal Employment Opportunity Commission (EEOC) plans to collect pay data from large employers with more than 100 employees in an attempt to reveal potentially discriminatory pay practices, particularly with respect to women and ethnic minorities. Through a proposed revision to the Employer Information Report (EEO-1), covered employers will be required to report the number of employees by race, gender, and ethnicity who are paid within each of the proposed 12 pay bands, including the number of hours said employees worked in the applicable time period.

The EEOC’s announcement of these proposed changes coincided with a White House commemoration of the seventh anniversary of the Lilly Ledbetter Fair Pay Act, a law which prohibits sex-based wage discrimination between men and women in the same establishment who perform jobs that are substantially the same. The proposed changes were officially published today in the Federal Register. Interested parties and members of the public have 60 days following publication (April 1, 2016) to submit comments.

Expansion of Covered Employers

The U.S. Department of Labor and the Office of Federal Contract Compliance Programs (OFCCP) already collect wage data, sorted by gender, race, and ethnicity, from federal contractors. The revised proposal will cover all businesses with 100 or more employees, regardless of whether the contract is with the government. Federal contractors with 50-99 employees would not be required to report pay data but still would be required to report statistics for sex, race, and ethnicity, as is currently required.

Data to be Collected

The EEOC, with the assistance of the OFCCP will collect the data, which they will use to identify companies that should be investigated for failing to pay workers fairly. Specifically, both agencies plan to use the pay data collected “to assess complaints of discrimination, focus agency investigations, and identify existing pay disparities that may warrant further examination.” The goal is to be able to identify if and where pay disparities exist on the basis of race, gender, and ethnicity across industries and occupational categories. Unfortunately for employers, the EEOC will be getting data without context—the proposed changes do not address how the EEOC would account for numerous other factors that may affect an individual’s pay, like performance, education, and seniority.

Proposed Pay Bands

Under the EEOC’s revised proposal, employers would report data based upon 12 pay bands. These bands mirror the bands utilized by the Bureau of Labor Statistics in the Occupation Employment Statistics survey and are as follows:

  1. $19,239 and under;
  2. $19,240 -$24,439;
  3. $24,440-$30,679;
  4. $30,680-$38,999;
  5. $39,000-$49,919;
  6. $49,920-$62,919;
  7. $62,920-$80,079;
  8. $80,080-$101,919;
  9. $101,920-$128,959;
  10. $128,960-$163,799;
  11. $163,800-$207,999; and
  12. $208,000 and over.

Under the proposal, covered employers would use employees’ total W-2 earnings for a 12-month period looking back from a pay period between July 1 and September 30. Employers would then calculate and report the number of employees whose W-2 earnings for the prior 12 months fell with each pay band, separated by job categories.

Employer Impact

While we anticipate a significant number of business organizations will oppose this proposal and submit comments before the April 1 deadline, now would be a good time to conduct an internal audit and review your company’s pay practice. This will allow your business to proactively address any potential issues ahead of the new reporting guidelines. There is no doubt the EEOC and OFCCP will use the data collected as ammunition against businesses whose pay practices appear inequitable. Thus, a prudent employer would review its pay practices and make necessary changes in advance of the implementation of the new requirements.

As this issue continues to develop, Dinsmore will keep you updated on new developments. Please contact us with any questions.