Yesterday, August 29, 2017, the Office of Management Budget’s (OMB) Office of Information and Regulatory Affairs (OIRA) announced that the pay reporting requirement of the EEO-1 will be delayed and not required in the March 31, 2018 EEO-1 reporting cycle.  This news was greeted as a sign of relief by the employer community.  The standard EEO-1 report, though, will still be required for filing on March 31, 2018.

The pay reporting tool was finalized by the EEOC in early 2016. All employers with 100 or more employees would have to report on pay for their employees at each location.  The new EEO-1 data collection tool would have had two components: Component 1 would have collected the same data that is gathered by the currently approved EEO-1, and Component 2 would have collected data on employees' W-2 earnings Box 1 and hours worked in 12 salary bands.  The EEOC then proposed to conduct analyses on the data to determine salary disparity issues.  Under the Equal Pay Act, the EEOC could initiate an office complaint against an employer if pay disparity is found.

The regulations that required the pay reporting requirement were finalized in early 2016, and therefore were not subject to the Congressional Review Act, which would allow Congress by joint resolution to stop “bad” regulations from being implemented.   Therefore, to stop the implementation of the tool, there were three options.  First, the EEOC could withdraw the proposed pay collection tool by regulation.  However, the EEOC currently has a 3-1 Democrat majority.  Second, Congress could deny funding for programming of the tool, which the House budget bill did do.  Third, OMB could delay the tool requesting further review, which was undertaken after a request by the U.S. Chamber of Commerce earlier in 2017, which claimed that the EEOC greatly underestimated the burden (time and cost) on employers.  

Other factors impacted the viability of the tool as well.  First, 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.

In the end, OMB agreed with the Chamber.  “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. “We don’t believe it would actually help us gather information about wage and employment discrimination."  In a memo, dated August 29, 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.”  The pay reporting component was indefinitely delayed, but not eliminated yet.

Therefore, employers will be required to file the standard EEO-1 report by March 31, 2018.  Federal contractors will still be required to file the VETS 4212 report by September 30, 2017.

Source: Seyfarth Shaw 8/29/17, The Wall Street Journal 8/30/17