TICUA / WALLER LEGAL NOTES
The EEOC Renews its Focus on Pay Disparities with Proposed New EEO-1 Reporting Requirements
By Aron Karabel
On Friday, January 29, 2016, the EEOC proposed new regulations (the proposed regulations can be found here) expanding existing reporting requirements to include compensation data. The EEOC’s stated purpose for these regulations is to “identify and combat pay discrimination … [and] focus enforcement resources on employers that are more likely to be out of compliance with federal laws.” If adopted, the regulations will take effect September 30, 2017.
The EEO-1 is an annual report completed by federal contractors and private companies that employ at least 100 employees. Employers that fall within either category must tally and report employee numbers for a single pay period by both job category and then by sex, race, and ethnicity. The following questions and answers identify the employers that are subject to the regulations and explain how pay data must be collected internally and reported to the EEOC.
- Which employers are subject to the new regulations?
The regulations are only applicable to federal contractors with at least 50 employees and non-contractors with at least 100 employees. Nothing changes for employers who do not fall into either category.
- What new information must be collected?
Beginning in 2017, covered employers must collect W-2 earnings (i.e., all earned income such as base pay and supplemental pay such as bonuses and overtime pay) for employees that fall within any EEO-1 job category (Executive/Senior Level Officials and Managers; First/Mid-Level Officials and Managers; Professionals; Technicians; Sales Workers; Administrative Support Workers; Craft Workers; Operatives; Laborers and Helpers; and Service Workers) by sex, race, and ethnicity. Employers must collect pay data for each employee for a 12-month period looking back from any pay period between July 1 and September 30 of the reporting year. For example, a covered employer could use an employee’s aggregated W-2 data for the twelve months preceding the first pay period in July of the reporting year.
A covered employer must also count the number of hours worked by employees in each job category. According to the EEOC, this will account for part-time workers, individuals who have worked less than 12-months, and individuals who receive W-2s from multiple employers.
- How does such information get organized and reported on the EEO-1?
For each EEO-1 job category, there will be 12 different pay bands. Those bands are listed on Table 1 of the attached regulations. Covered employers will be required to identify the number of employees whose W-2 earnings fall within each pay band. For example, an employer could report that there are 12 African American employees who are First/Mid-Level Officials and Managers in the seventh pay band ($62,920-$80,079).
Covered employers would also report the total number of hours worked for all employees within a particular pay band. In the example above, if the 12 African American employees worked an aggregate total of 10,000 hours, then that number would also be reported in the pay band.
These new regulations pose significant challenges for covered member institutions. First, it is yet another example of the government requiring institutions to do more with less. The new regulations will require substantial additional time and expense gathering, tabulating, and reporting pay data for every single employee of the institution. Second, the new regulations will also require the disclosure of confidential employee salary data. Although the EEOC treats employer pay data as confidential, it may disclose such information once a legal proceeding is instituted that relates to such information. Third, the data provided will not account for legitimate non-discriminatory variables in compensation decisions. Nor will it account for nuances in pay such as skill, effort and responsibility within each job category.
In addition to these challenges, several important questions remain unanswered. How should an employer account for hours worked by exempt employees? How will the aggregate data be used by the EEOC? How will the EEOC enforce pay disparities when there is no charge of discrimination filed? How will the EEOC account for false positive pay disparities? Will the EEOC account for other relevant factors that impact compensation such as performance, education and seniority? We hope that many of these questions will be answered following the comment period ending April 1, 2016.
What should institutions do for now? Since these new proposed regulations have not yet been finalized, and will not go into effect until the fourth quarter of 2017, institutions need not attempt to start active compliance efforts now by aggregating hours worked within each proposed pay band. Institutions would, however, be well served to conduct internal compensation audits to identify any apparent disparities in pay, and make any necessary changes prior to 2017.
If you have any questions about legal compliance issues facing Higher Education in 2016, please feel free to contact any of the members of Waller’s Higher Education team.
Waller is pleased to have partnered with TICUA to bring you this series of Legal Notes. If you have questions or suggestions for future topics, please contact Claude Pressnell () or Jeb Gerth ().
The opinions expressed in this article are intended for general guidance only. They are not intended as recommendations for specific situations. As always, readers should consult a qualified attorney for specific legal guidance.
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