A very controversial change to the EEO-1 report has been approved by the Office of Management and Budget (OMB) after a divided vote by the EEOC Commissioners to approve the new reporting requirements. The current administration believes that there needs to be more transparency on pay reporting by employers to combat the pay disparities that women are experiencing.
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 OMB. The OMB approved the EEOC’s Final Revisions on September 29, 2016.
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).
In short, there will be no actual EEO-1 reporting during the 2017 year. The 2017 EEO-1 reporting must be completed by March 31, 2018, based on a workforce snapshot on a pay period during the period of October 1-December 31, 2017. Click here for a sample copy of the new EEO-1 reports starting 2017. 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. Click here for a copy of the final pay bands. This type of reporting is already in place for the Integrated Postsecondary Education Data System (IPEDS) reports that are required for universities and colleges.
For employers with less than 100 employees, they will file the EEO-1 reports as before, without pay data, again by March 31, 2018.
Employers are required to account for and include all employees who were active as of that snapshot’s pay period. If they terminated before that pay period, they will not be included in the report. If an employee was hired after that pay period, that employee would also not be included in the report.
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.
In addition, employers will have to identify the hours worked (FLSA standards) by category for employees and report on that as well. For example, an employer would report that the ten African-American men who are Craft Workers in the second pay band worked a total of 10,000 hours. For non-exempt workers, employers will report actual hours worked (including overtime hours). For exempt employees, employers have the option to use: 1) proxy hours of 40 hours per week for full-time exempt employees and 20 hours per week for part-time exempt employees; or 2) provide actual hours if the employer tracks hours worked for exempt employees.
Employers opposing the proposal expressed concern that the EEOC would make unfounded inferences of discrimination based on its statistical analysis of the EEO-1 Component 2 pay data which, in turn, would result in unwarranted and burdensome EEOC investigations. If employees are hired into a category during the course of the year, only earnings for the time worked for the employer will be reported. Therefore, the EEO-1 reporting may show various skews of data depending on hiring and turnover of employees. In addition, eligibility for overtime, commissions, and bonuses are typically not the same for full-time, and partial-year or part-time employees. Therefore, any statistical analysis on that data would be suspect. However, the EEOC is confident that their data analyses approach will have few statistical errors.
Given the new reporting requirements and the renewed efforts by various states, employers should begin conducting pay analysis under attorney privilege to identify potential issues before any reporting is done. Those employers who get caught with EEOC investigations and who failed to do any analysis before submission of data will spend more later to defend themselves.
Second, employers will need to focus on making its EEO-1 reporting system compliant with the new reporting structure. This will require HR, Payroll and IT to begin the planning process for 2018 implementation. The costs are unknown as two or three or more different systems will need to be reconciled for this reporting. The number of fields in the new EEO-1 report has ballooned to 3,360 data points per establishment report. As a result, it will take some time to develop and implement the right mechanisms to submit the new EEO-1 reports to the EEOC.
Sources: EEOC, Seyfarth Shaw 9/29/16, Jackson Lewis 9/29/16