The U.S. Equal Employment Opportunity Commission (EEOC) commissioned a report by the National Academies of Sciences, Engineering, and Medicine (NAS), which studied the EEOC’s historic, first-time collection of pay data from certain private employers and federal contractors completed in 2020. The NAS study was commissioned by a unanimous vote of the bipartisan Commission in 2020. The report is 275 pages long and can be found here.
It's an extremely dense report as one commentator stated.
According to the NAS report, the study found that the data EEOC collected may be used effectively by the agency to help focus its resources to identify pay discrimination and offers short-term and long-term recommendations for improving pay data collection by the agency if undertaken in the future.
The data collected was Box 1 from the W-2. This data is extremely problematic. As was pointed out to the NAS, the EEO-1 component 2 report was requesting static data (point in time for 4th quarter) and matching it up with full year data reported in Box 1. This data is not accurate in terms of comparability. Medical, 401K, HSA, and other electives are taken out. However, no one is the same and no company is the same with medical. For example, one company may require a 10% copay and another 15%. One company’s policy may have more benefits than another’s and be costlier.
Further, someone who was hired during the reporting period or someone who may have terminated will not have full year data. For example, an African American female Executive hired let’s say November 1 could be compared to White Male executives who worked the entire year. In this situation, a false positive would arise, all things being equal, and could show that there is pay disparity between the male and female when the female could be making more annualized salary than the male. Yet the report now recommends Box 5 of the W-2 given these obvious issues.
The data was organized and reported by EEO-1 job groupings. For example, EEO-1 grouping 2-Professionals can have a wide range of employees reported from junior to senior in various grades. Think about the following that was in the press release announcing the issuance of the report:
- One employer had a -51.3% pay gap for Black men compared to white men in the professionals job category;
- Another employer had a -52.3% pay gap for Hispanic female professionals relative to white male professionals; and
- A third employer had a -52.4% pay gap for Asian female technicians compared to white male technicians.
These results in isolation may say something, but in reality, they have no meaning. Hire and termination dates may play a role, differences in titles and pay grades another, or just personal preferences for savings or healthcare (e.g. one may on a spouse healthcare and not take advantage of company’s healthcare). This is window dressing for political purposes to justify the collection of the data. The NAS report went beyond the quality of data by recommending an overhaul of the EEO-1 report justifying the change they need to create a better report for analysis that reflects today’s workforce.
ASE was represented at a meeting before the NAS committee and had the first non-government participant who actually prepared EEO-1 component 2, California reporting, and IPEDS reporting (university reporting). As ASE pointed out, as others also did, annualized salary, although not perfect, would be better to collect and analyze as a starting point if the tool was to become live again. It is understandable to collect the data, but do it right. It would be easier for HR to collect and report (one system likely than three or more) and there would be no need to collect hours.
Without going into more detail, this report had to justify the time spent. The quality of the data analyzed was bad and false positives are being publicized. A closer reading of the report finds recommendations that hedge bets. Although they won’t admit it, there is no predictive reliability with the Component 2 data. The NAS did recognize some issues with the data and made recommendations as to the collection issues, but in the end justified the data collected. This will become a major issue for this administration if they act upon this report without further studies.
Finally, the report recommended the following:
- The collection of compensation data, using W-2, box 5 data (not box 1 data, as was previously done).
- A redesign of the EEO-1 form to provide for a single data collection—not using Components 1 and 2.
- The NAS recommends collecting data based on either narrower pay bands (not EEO-1 groups) or individual pay data (recommended) and job tenure, experience and education.
- The use of standard occupation classifications instead of the broad EEO-1 categories.
- Distinguishing between Exempt and Non-Exempt, and Full Time and Part Time employees.
- Collect actual hours worked for Non-Exempt employees.
- Collect pay data based on age (40 or older), disability, and veterans status, in addition to the existing EEO-1 categories, and also collect data based on sex, gender identity, and sexual orientation.
- Field testing by EEOC before implementing any new requirements.
If the EEOC approves these recommendations straight out, it will be a nightmare for employers. They should go through rulemaking.
As EEOC Commissioner Sonderling points out in his statement about the report, “The report, however, highlights the difficult task of the government attempting to extract pay data from private employers. It also exposes the flaws with the EEOC’s prior approach, including its flawed methodology, failure to conduct a proper pilot program, and data quality issues. The report provides suggestions for future collection methods that may offer better utility to the Commission. . . If the Commission believes a future pay data collection is warranted, which no Commissioner should prejudge, it must be done through a process that allows significant public input through formal rulemaking. If the Commission had engaged in rulemaking in 2016, many of the concerns raised by the public and substantiated in the report would have been avoided.”
New day, same’o same’o.
Source: Jackson Lewis 7/28/22, Fortney Scott 7/28/22, DCI 9/8/2006