By: Bill Buechner
On February 1, 2016, the EEOC published in the Federal Register notice of a proposed rule that would require employers with 100 or more employees to provide pay data for their employees on a revised EE0-1 form. The revised EEO-1 form would require employers to identify the number of employees by race, gender and ethnicity who fall within one of 12 specified pay bands ranging from $19,239 to $208,000 and over. These employees would continue to be classified in the 10 existing job categories (executive, professional, laborers, etc.). The EEOC asserted that pay discrimination remains a significant problem, and that gathering this pay information would assist it in investigating charges of pay discrimination. The proposal provided for a 60-day comment period, and the EEOC also conducted a public hearing on the proposed rule in March.
As a result of concerns raised by employers, employer associations, human resources organizations and other groups, on July 13, 2016, the EEOC published in the Federal Register a revised proposed rule. The EEOC has provided a summary of the revised proposed rule on its website, including a link to the revised proposed rule. (See here). The revised proposed rule addresses some concerns expressed by employers, but many additional concerns remain.
Proposed Deadline For Submitting Pay Information
Whereas the initial proposed rule would have required employers to provide the pay data by September 30 beginning in 2017, the revised proposed rule moved the due date back to March 31, 2018 and March 31 of every year thereafter. Thus, there would be an 18-month “break” after employers submit their EEO-1 information in its current form (without pay data) by September 30, 2016 before they would be required to submit the proposed revised EEO-1 form (with pay data and hours worked) by March 31, 2018. The EEOC made this change so that employers could use the W-2 information that they already collect for tax purposes and thereby ease the burden on employers.
Proposed Pay Period That Employers Could Select To Submit Pay Information
The revised proposed rule would allow employers to select any pay period between October 1 and December 31, whereas the initial proposed rule would have required employers to pick a pay period between July 1 and September 30. This proposed change to the “snapshot period” is intended to respond to employer concerns that a “snapshot period” earlier in the calendar year would not capture promotions or pay increases later in the calendar year that could move employees into higher pay bands.
Source of Pay Information
The EEOC also clarified in the revised proposed rule that employers would be required to report the pay information set forth in Box 1 of the W-2 form. In doing so, the EEOC rejected requests that employers be allowed to provide base pay because the EEOC believes that certain types of supplemental pay such as overtime, performance-based bonuses, shift differentials and incentive pay are significant areas where pay discrimination can occur, and only W-2 information would encompass such supplemental pay.
Hours Worked Information
The revised proposed rule reiterates that employers must also provide aggregate information regarding hours worked because this information will be useful in explaining pay disparities in at least some instances. The EEOC reiterated that employers already must keep records concerning hours worked for non-exempt employees in order to satisfy their FLSA obligations. As to exempt employees, the revised proposed rule provides that employers may either (1) use a “proxy” 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 worked for exempt employees if the employer already maintains accurate records of this information.
Estimated Cost To Employers
The EEOC estimates that the average annual cost for providing the pay and hours worked information set forth in the revised proposed rule is approximately $416 per employer.
Remaining Employer Concerns
The EEOC clearly attempted to address at least some employer concerns in its revised proposed rule, but it rejected many other concerns raised by employers, such as the overall utility of the pay information that would be required, as well as privacy and confidentiality concerns. Another primary concern for employers is that the EEOC will rely on the aggregate pay information provided by employers on the revised EEO-1 form to determine that pay discrimination is taking place when the detected pay disparities are the result of non-discriminatory factors such as employee choices, education, experience and other permissible factors. One concrete example of employee choices skewing pay data is employee decisions regarding how much of his or her pay to contribute to a retirement plan, which impacts the pay reported in Box 1 of the W-2 form for that employee.
Employers have until August 15, 2016 to submit comments regarding the revised proposed rule. Although additional minor modifications are possible, it appears likely that the EEOC will issue a final rule substantially similar to the proposed revised rule. Accordingly, employers should carefully review their pay practices, identify any potential problematic pay disparities that could be scrutinized by the EEOC with the pay data that will be available to the EEOC and take any corrective action necessary.