Employment Law Update

For more than 50 years, the U.S. Equal Employment Opportunity Commission (EEOC) required employers with 100 or more employees to file an annual “Employer Information Report EEO-1.” The EEO-1, as the report is known, has long required employers to identify employees by job category, sex, race and ethnicity (“Component 1” data).

In 2016, under the Obama administration, the EEOC announced it would expand the EEO-1 process to require employers to submit employee wage and salary information for the first time beginning in March 2018. The announced purpose of the new “Component 2” data requirement is to help the agency understand “pay gaps” related to race and sex in order to better enforce the equal pay laws.

Implementation of the pay data requirement was delayed in 2017 when the federal Office of Management and Budget (OMB) under the Trump administration placed a stay on implementation of the new requirements. However, after two nonprofits sued to lift the OMB stay, a federal court ordered the EEOC to proceed with the process.

As a result, the EEOC is mandating that employers submit pay data for 2017 and 2018 by September 30, 2019. Although the U.S. Department of Justice has filed an appeal of the court’s ruling, the EEOC issued a statement telling employers that the appeal does not impact the September 30 deadline.

The EEOC is currently expected to open its Component 2 portal on July 15, 2019.

Which Employers Are Affected by the New EEO-1 Pay Data Reporting Requirement?

The new requirements affect all employers that are required to file an EEO-1 report:

• All private (nongovernmental) employers with 100 or more employees, and;
• All federal contractors with 100 or more employees and contracts of at least $50,000.

What Data Has to Be Reported?

The EEOC has instructed employers to select one “workforce snapshot” pay period within the fourth quarter (October-December) of each survey year and to report the required pay data for all employees:

• Employers must identify the number of employees by race/ethnicity and sex within each of the ten EEO-1 job categories who fall within 12 defined pay bands.
• Employers must also report aggregated hours worked data for all employees in each job category and pay band by sex, race and ethnicity.
• Employers are to determine each employee’s pay band based on W-2 Box 1 income. Earnings reported in Box 1 include base pay, overtime wages, shift differentials, commissions, bonuses and fringe benefits. Box 1 does not include deferred income, such as 401(k) or 403(b) contributions.

For nonexempt employees, those who are covered by the minimum wage and overtime pay protections of the Fair Labor Standards Act (the federal wage and hour law), employers must report the actual hours recorded.  

For employees who are exempt from the minimum wage and overtime pay protections of the federal wage and hour law, employers may either:

• Report 40 hours per week for full-time exempt employees and 20 hours per week for part-time exempt employees, multiplied by the number of weeks these individuals were employed during the EEO-1 reporting year; or
• Provide actual hours worked by exempt employees during the EEO-1 reporting year if the employer maintains accurate records of that information.

Next Steps

Employers should review their payroll systems to identify where responsive information is stored and determine how best to gather the required data. If the company’s payroll information is held by a third-party provider, the employer should contact the provider to discuss the process for collecting the information. Employers may also want to consult with employment counsel prior to submitting pay data results.

Potential Penalties for Failing to File an EEO-1

The EEOC is not authorized to impose fines for noncompliance; however, the agency can file for injunctive relief and request that a U.S. District Court compel an employer to file a completed EEO-1. Nevertheless, noncompliance may carry potentially severe consequences for federal contractors. If noncompliance is discovered during an audit by the Office of Federal Contract Compliance Programs (OFCCP), the agency may issue a notice of violation and penalties.

If you have any questions regarding the new wage reporting requirements of the EEO-1, please contact Charles R. Bacharach or Robert C. Kellner.

Charles R. Bacharach
410-576-4169 • cbacharach@gfrlaw.com

Robert C. Kellner
410-576-4239 • rkellner@gfrlaw.com