On January 29, 2016, President Obama announced a new initiative to collect compensation data from all employers with 100 or more employees.
Companies with 100 or more employees, and federal contractors with at least 50 employees and federal contracts valued at more than $50,000, have long been required to file an EEO-1 report each fall. The report requires covered employers to provide a count of their employees by job category and then by ethnicity, race and gender.
The EEOC uses EEO-1 data to support its civil rights enforcement efforts and to analyze employment patterns, such as the representation of female and minority workers within companies, industries or regions.
B. The Proposed Rule
The proposed rule published by the Equal Employment Opportunity Commission (EEOC) on February 1, 2016, would revise the EEO-1 process to require all employers with at least 100 employees to "collect aggregate W-2 data in 12 pay bands for the 10 EEO-1 job categories." Such employers will also be required to report the total number of hours worked by the employees included in each EEO-1 pay band.
The EEOC says "this data will allow analysis of pay differences while considering aggregate variations in hours." The EEOC states that it plans to "develop a software tool" that will allow its investigators to assess W-2 pay distribution within a single company and compare that company's data to aggregate industry or metropolitan-area data to "highlight statistics of interest."
The EEOC will consider comments on the proposed rules before issuing a final rule. It is expected that the compensation data reporting requirements will be finalized by September 2016, and employers will need to file their first new reports in the fall of 2017. For the 2016 EEO-1 reporting cycle, covered employers will continue to submit the currently required EEO-1 data.
Not surprisingly, reactions to the proposed rule have been mixed. Civil rights groups and lawyers who represent employees assert that the new requirements will shed light on otherwise hard to find pay information, and will assist EEOC enforcement actions on pay equity.
Business groups and other detractors voice concerns that the new requirements will impose a burden on employers, and that collecting aggregated pay data applied across broad job categories such as "professionals" and "administrative support workers" will not provide meaningful information.
This will be the first time that all employers with at least 100 employees will be required to submit compensation data to the federal government.
Employers affected by the proposed rule should use the period before the rule takes effect to audit their pay practices and employee compensation. Conducting such assessments with the involvement of legal counsel will protect the confidentiality of the review.