On Monday a federal judge ordered the White House budget office to lift its stay of the reporting of pay with the EEO-1 tool granting summary judgment to the National Women's Law Center and the Labor Council for Latin American Advancement.  It is questionable whether the two groups have standing to bring this lawsuit.

The Obama-era rule was highly controversial.  The EEO-1 Report is a survey document that has been mandated for more than 50 years. Employers with more than 100 employees and federal contractors or subcontractors with more than 50 employees are required to collect and provide to the EEOC information about employees’ race/ethnicity and sex in each of ten job categories (e.g., Executive & Senior-Level Officials and Managers, First/Mid-Level Officials & Managers, Professionals, Technicians, Sales Workers, Administrative Support Workers, Craft Workers, Operatives, Labors and Helpers, and Service Workers). 

The EEOC issued revisions to the EEO-1 report on February 1, 2016 followed by a 60-day comment period.  On March 16, 2016, the EEOC held a public hearing regarding the EEO-1 report during which a number of organizations presented.  In response, the EEOC made minor revisions to the proposed EEO-1 report on July 14, 2016 and submitted its final revisions for OMB review and approval.  There was an additional 30-day comment period that ended on August 15, 2016.  Nearly 1,000 comments were submitted to the Office of Management Budget (OMB). The OMB approved the EEOC’s final revisions on September 29, 2016.

For employers that have 100 or more employees, they will be required to report pay data by identifying the number of employees who have pay within one of the twelve specific pay bands by gender and ethnicity or race.  For employers with less than 100 employees, they will file the EEO-1 reports without pay data.  The pay data required for the report is actual W-2 Box 1 earnings.  In the initial proposal, the EEOC wanted to have the reporting period the same as before but have employers create mid-year W-2 reports to identify Box 1 earnings for the year to date.  The outcry against this approach was great, and the EEOC acceded to employers’ request for the annual year W-2 reports.  For that reason, the EEOC agreed to the March 31st reporting date.  

Contractors had argued that the use of W-2 Box 1 data would not have produced meaningful results.  The EEOC would not take into account the issue of personal choice, from how much an employee would allocate to a retirement plan, such as a 401K, to pretax healthcare allocations, among other things.  A male and female employee could make the same annual salary, but personal choice could lead to a false indicator of pay disparity.

Second, the EEOC never disclosed their methodology for analysis.  When the reporting tool was first proposed in 2012 by the Office of Federal Contract Compliance Programs (OFCCP), the National Academy of Sciences conducted a review of the proposed tool.  Its report, “Collecting Compensation Data from Employers,” concluded that the agencies “prepare a comprehensive plan for use of earnings data before initiating any data collection.”  EEOC and OFCCP failed to do so.

Third, the confidentiality of the data reported had serious issues ranging from data protection in the tool, from hacking to the lack of protection of confidentiality of an employee whose pay is being reported.  In the latter situation, a minority employee may be the only one in an EEO-1 category at a location, and since the EEO-1 report was to be published by the EEOC, that employee could be easily identified.

Fourth, the time commitment and costs identified by the EEOC was way under-reported.  The EEOC assumed that both the pull of the data and the time to enter it would be essentially de minimis.  However, the U.S. Chamber of Commerce showed the fallacy of the EEOC’s assumptions. 

Based on the above, the acting Chair of the EEOC, Victoria Lipnic, requested a re-review of the rule.  On August 29, 2017, the OMB Office of Information and Regulatory Affairs (OIRA) announced that the pay reporting requirement of the EEO-1 will be delayed and not required.  “It’s enormously burdensome,” said Neomi Rao, administrator of the Office of Information and Regulatory Affairs, which analyzes the cost of federal rules and regulations at the time. “We don’t believe it would actually help us gather information about wage and employment discrimination."  In a memo, dated August 29, 2017 to Victoria Lipnic, the acting chair of the EEOC, OMB wrote that “[a]mong other things, OMB is concerned that some aspects of the revised collection of information lack practical utility, are unnecessarily burdensome and do not adequately address privacy and confidentiality issues.” 

With the District Court’s decision, pay collection must be included with the tool.  However, the fight is not over.  The opinion will likely be appealed and pay reporting stayed.  Further, even without a stay, with the tool opening in two weeks, it may not be enough time to have an appropriate tool and security in place.  Therefore, the EEO-1 reporting time frame may again be delayed.  Furthermore, if pay reporting is required, the deadline will likely be extended. 

On the other hand, the EEOC could delay the EEO-1 reporting until after the new EEOC Chair is confirmed, and with a 2-1 Republican majority, vote to rescind the pay reporting rule.  However, that may not bar collection of data during this reporting period.  So be prepared to report pay this reporting period until told otherwise.

ASE will continue updates on this matter. If you have any questions or need assistance, please contact Anthony Kaylin.

Source:  Law360 3/5/19, Seyfarth Shaw 9/29/16, 8/29/17, Jackson Lewis 3/5/19