EEOC to Require Pay Data From Employers Starting in 2017

In an on-going effort to close the pay gap for women and minorities, on January 29, 2016, the Obama Administration announced that the U.S. Equal Employment Opportunity Commission (EEOC) will now require federal contractors and employers with 100 or more workers to provide data related to pay practices. Starting in September 2017, the EEOC will request data on pay ranges and hours worked for all employees in addition to the information collected on employer EEO-1 reports. The EEO-1 report, also known as the "Employer Information Report," is a compliance survey mandated by federal statute and regulations which must be submitted and certified no later than September 30th, annually. The report currently requires federal government contractors and companies with 100 or more employees to disclose employment data to be categorized by race, ethnicity, gender and job category.  In addition, employers will must report job categories and pay bands but will not be required to report specific salaries of each individual employee.  Employers will also be required to report on the total W-2 earnings as the measure of pay.

The new requirement will provide the EEOC and the U.S. Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) with more insight into pay disparities across different industries and occupations as well as assist the agencies in investigating those employers who appear to be engaged in wage discrimination.  The EEOC’s announcement was made on the seventh anniversary of the Lilly Ledbetter Fair Pay Act which provides employees with a 180-day statute of limitations for filing an equal-pay lawsuit regarding pay discrimination after each paycheck.

The Obama Administration estimates that compliance with the new EEO-1 reporting requirements will cost less than $400 per employer the first year and a few hundred dollars per year after that.  The EEOC’s proposed revisions to the EEO-1 report were published as of February 1, 2016. Public Comment on the proposed changes will be open until April 1, 2016.

What This Means For Employers:

• For the 2016 EEO-1 reporting cycle, all employers will submit information that is identical to the information collected by the currently approved EEO-1 report.

• Starting in 2017, federal contractors and employers with 100 or more employees will submit the EEO-1 report with pay and related information before September 30th. These employers must report all W-2 earned income.

• Although EEO-1 reporting is due on or before September 30^th each year, the EEOC guidelines suggested that W-2 data can be imported into a human resources information system (HRIS), and a data field can be established to accumulate W-2 data for the EEO-1. Alternatively, employers could obtain this pay information by utilizing quarterly payroll reports for the previous four quarters. Employers that do their payroll in-house will be able to report this data utilizing most major payroll software systems or by using off-the-shelf payroll software that is preprogrammed to compile data for generating W-2s. For employers that outsource their payroll, there would be a one-time burden of writing custom programs to import the data from their payroll companies into their HRIS systems. Employers then must count and report the number of employees in each pay band. During the comment period, the EEOC seeks employer input with respect to how to report hours worked for salaried employees.

• Beginning in 2017, all filers will be required to submit the proposed EEO-1 report electronically.

Given the EEOC’s new requirement, employers should start to audit their pay policies and practices as those employers who are engaging in pay disparity can expect an increase in pay discrimination cases based on the data collected as a result of the revised EEO-1 reports.

For more information regarding compliance with EEO-1 reporting obligations and how the new rule will affect your business, please contact Dina M. Mastellone, Esq., Director of the firm’s Human Resources Practice Group, at dmastellone@genovaburns.com or 973-533-0777.