EEOC Effort To Fight Wage Gap Gets Mixed Feedback

EEOC Effort To Fight Wage Gap Gets Mixed Feedback

Back in January of this year, the EEOC announced its plans to gather additional pay information from federal contractors and large employers (more than 100 employees) to help combat pay inequality. The process involved a public comment process which just closed on April 1st, resulting in 322 public comments from a variety of interested parties — employers, employees, members of Congress, academics, etc. The feedback was mixed with proponents advocating for a long overdue federal data collection process to help fight inequality. Opponents argued that the proposal was poorly designed and would only result in unusable data at a tremendous burden to employers.

Download our free white paper New Laws Affecting Employers in 2016 and avoid costly mistakes

By way of background, the current EEO-1 form requires federal contractors with 50-99 employees and private employers with more than 100 employees to provide basic demographic information such as race, gender, and ethnicity by September 30th of each year. If the proposed revised EEO-1 form goes into effect, it will now require employers to additionally provide detailed pay information across 12 specified pay bands, listed below. Employers (including federal contractors) with 100 or more employees will be required to submit the pay data. Federal contractors with 50-99 employees would not report the pay data (but still report the data currently required by the EEO-1 form). Finally, private employers with 1-99 employees and federal contractors with 1-49 employees would not be required to fill out the EEO-1.

More specifically, the proposed data collection would have two components: First, Component 1 would collect the same data that is gathered by the current EEO-1 form on employees’ ethnicity, race, and sex, by job category.

  • The ten EEO-1 job categories are: Executive/Senior Level Officials and Managers; First/Mid Level Officials and Managers; Professionals; Technicians; Sales Workers; Administrative Support Workers; Craft Workers; Operatives; Laborers and Helpers; Service Workers.
  • The seven race and ethnicity groups are: Hispanic or Latino, White (Not Hispanic or Latino); Black or African American (Not Hispanic or Latino); Native Hawaiian or Other Pacific Islander (Not Hispanic or Latino); Asian (Not Hispanic or Latino); American Indian or Alaska Native (Not Hispanic or Latino); and Two or More Races (Not Hispanic or Latino).

Second, Component 2 would collect data on employees’ W-2 earnings and hours worked across twelve (12) pay bands:

(1) $19,239 and under;

(2) $19,240 – $24,439;

(3) $24,440 – $30,679;

(4) $30,680 – $38,999;

(5) $39,000 – $49,919;

(6) $49,920 – $62,919;

(7) $62,920 – $80,079;

(8) $80,080 – $101,919;

(9) $101,920 – $128,959;

(10) $128,960 – $163,799;

(11) $163,800 – $207,999; and

(12) $208,000 and over.

The EEOC’s pursuit of additional information regarding pay is designed to address gender and other bases for pay inequality. As the EEOC Chair, Jenny R. Yang, put it, “[t]he lack of data has been a significant barrier to tackling unfair pay. This proposal is intended to provide the data that is needed to better understand where potential pay problems exist, so that we can strengthen our enforcement efforts and employers can work proactively to address them.” An example of the proposed EEO-1 form is available here. According to the White House, this proposal would cover more than 63 million workers in the United States.

Mixed Feedback from the Public

The proposed changes were published in the Federal Register here on February 1, 2016 and were open for public comment during a 60-day period which recently ended on April 1, 2016. The EEOC received 322 comments. A public hearing concerning the proposed changes to the EEO-1 form took place on March 16, 2016. The EEOC heard from fifteen (15) witnesses representing a wide array of interested parties, including employers, employees, and academics. The statements and biographies of the witnesses at the hearing are available here.

Proponents of the proposal included unions, members of Congress (including a group of nearly 80 House Democratic and group of nearly three dozen Democratic senators), and the American Bar Association. These groups support the EEOC’s proposal and view it as a necessary step to effectively address gender pay inequality that is long overdue in light of persistent wage gap issues. The group of Democratic senators commented that “The compensation data collected by the revised EEO-1 will give the public valuable insight into what the pay gap looks like both geographically and by industry … Employers will also benefit by, for the first time, being able to benchmark their performance versus their competition [and] they will also be able to empower their human resource departments to make data-driven changes to address any pay gaps that may exist within a firm.”

Opponents to the proposal don’t deny the good intentions behind the proposal but say that it needs to be revised or withdrawn. Opponents cite to a litany of issues that they believe are a highly likely outcome to the data collection process. First, opponents argue that the EEOC has failed to consider the tremendous administrative burden this will put on employers to collect the data. They argue that the data collection would be daunting for large employers with a variety of workers. Moreover, based on the limited data points gathered, opponents also argue that any analysis based on such limited data would necessarily result in false positives leading to unwarranted enforcement actions by the EEOC. Therefore, in addition to the administrative costs of collecting the data, employers would also be faced with litigation costs of opposing unwarranted enforcement actions by the EEOC. Opponents argue that pay structures and compensation packages for employees are based on highly complicated factors that will likely be misrepresented through a limited data collection.

What’s next?

The EEOC has stated that if all goes as planned, the revision process will be completed by September 2016. Employers will then have to submit their pay data starting in September 2017.  For now, especially in light of ongoing national and state-wide efforts to address pay gap issues, employers should begin the process of organizing and analyzing how they pay their employees. Whether the information is used to fill out forms for the government, fight a lawsuit based on allegations of pay inequality, or simply ensure compliance with the law, the data will likely be valuable in protecting a company’s interests.

Contributor:  Daniel C. Kim, Attorney at Law | Weintraub Tobin