On March 12, 2024, the EEOC issued a press release and report stating, “Men are more likely to be in higher pay bands than women.” This was the only meaningful statement in the report. Specifically, the EEOC released a data dashboard featuring the first-time collection of 2017 and 2018 pay data reported by about 70,000 private employers and certain federal contractors with 100 or more employees each year, representing over 100 million workers. The dashboard contains a unique collection of aggregated employer-level workforce demographic and pay data, reported by pay band.
It then stated that “[t]he release of this dashboard allows industries, employers, and individuals to assess generally how their pay by sex and race compares to others in their industry, job category, or state. Overall, the data employers reported shows in the aggregate that women are typically paid less than men.” Ironically, March 12, 2024, was Equal Pay Day.
The EEOC asked the National Academies of Science (NAS) to review the collection of data, and the NAS could prove the value but there were issues with the type of information collected and the process by which it was gathered. The NAS report itself was highly criticized, and the main point made was what data should be collected (Box 5 of the W-2).
There are a few problems with the data. The dashboard couldn’t provide anything more than the demographic distribution of employees in the bands. The major issues are discussed below.
First, and most importantly as Lynn Clements of Berkshire pointed out to the NAS panel, the data collected was point of time data with full year data. In other words, employers subject to component 2 reporting had to report on the active workforce on a date in 4th quarter and provide full year W-2 Box 1 income for that year. Therefore, if there were, for example, five incumbent white males in an EEO-1 category working since January of the reporting year and an African American woman was hired in October of that year into the same job at a rate that could be higher than the incumbents, the woman would be shown in a lower band than her peers. Her W-2 Box 1 naturally would not be anywhere near the amounts of the incumbent.
Second, the data included Box 1 of the W-2. Box 1 data is net of personal elections, such as 401K contributions, healthcare shared costs (cost sharing is not consistent in the same industry or across industries), and more. If women decided to save more in a 401K for example or had higher healthcare copays, it would impact the distribution of equally situated employees in the bands.
Although the NAS recommends using Box 5 of the W-2 which is grossed up income subject to the Medicare tax, the same issue of timing of hiring would distort the report. It was recommended that the EEOC use annualized base salary as the appropriate measure to eliminate the issue of timing of hiring. This approach was recommended by many commentators when the EEO-1 Component 2 report was published for comments.
Another issue was that full- and part-time employees were compared to each other. More women for a variety of reasons are likely to have part-time jobs, and if they had similar jobs to men, then obviously the report would show men in higher bands than women.
It should be noted that the pay gap between men and women is not an appropriate measurement of similarly situated employees. The pay disparity between similarly situated employees is, and base salary is the appropriate measure.
Third, the data is aggregated by EEO-1 category. Therefore, dissimilar jobs within the category are compared to each other. For example, in EEO-1 category 1.2 First/Mid-Level Officials and Managers will have supervisors, managers and directors all in the categories. In Category 2 Professionals it would include entry level to highly seasoned and comparing administrative to technical professionals.
In the final analysis the tool data is flawed, and any findings based on it should be taken lightly.
The pay data collection will be coming. It is a bipartisan agenda. However, when the new collection of a Component 2 is introduced, the EEOC has stated that "[a]ny new pay data collection would be preceded by additional and formal opportunities for public input, including public notice and a public hearing, and any such collection would be informed and guided by that public input." Let’s hope they keep their word.
Source: EEOC 3/12/24, Law360 3/12/24, Jackson Lewis 3/12/24