Pay Disparities and Form EEO-1: What to Report for 2018?

The Equal Employment Opportunity Commission’s (“EEOC”) Employer Information Report EEO-1 (“EEO-1”) has long been a governmental tool to gather data from large employers (100+ employees) on employees’ gender, race/ethnicity, and job category.  In 2016, the EEOC issued a proposed rule that expands the scope of EEO-1 to include W-2 wage information and total hours worked for all employees within 12 identified pay bands for the purpose of identifying pay disparities.  This caused much consternation in the business world, and many employers challenged the validity of linking W-2 wage information to an alleged pay disparity without accounting for the myriad reasons why W-2 gross income may be affected for nondiscriminatory reasons.

Although there was significant pushback, the revised EEO-1 requirements were adopted and were set to become effective on March 31, 2018.  But the Trump Administration intervened through the Office of Management and Budget, staying implementation of the revised EEO-1 on the basis that the data collected would be of limited utility, would be over burdensome to collect, and would invade people’s privacy.

The National Women’s Law Center and the Labor Council for Latin American Advancement filed a lawsuit challenging the OMB’s stay of revised EEO-1, and on March 4 of this year, a district judge in Washington, D.C. ruled that the OMB acted arbitrarily and capriciously in the way it handled the stay.  This ruling thus effectively reinstates the EEO-1 pay data requirements.

The problem, however, is that the EEOC was not prepared for such a ruling to be issued 12 weeks before an already extended May 31, 2019 filing deadline for 2018 data.  Many employers have already prepared their 2018 data, and the EEOC’s reporting portal is not currently set up to collect pay data.  Although the federal court recently required the EEOC to state its position on collecting pay data for the 2018 filing year by April 3, 2019, it is unclear whether the EEOC will forego pay data for 2018 given the short remaining filing window, or will require employers to provide pay data (possibly by further extending the filing deadline).  It is also likely that the Trump Administration will appeal the federal court decision.

As an employer, what can or should you do?  There are really two options: 1) take a “wait and see” approach and prepare the 2018 data without pay information; or 2) be proactive and begin collecting the pay data along with the other EEO-1 requirements.  Although it is possible that the EEOC will forego the pay data requirements for the 2018 reporting year or that an appeal would forestall any pay data reporting requirement for 2018, there is a reasonable chance that pay data will be required for 2018. Thus it will be beneficial for employers to begin collecting this data as soon as possible to avoid a rush that would occur if an employer takes a “wait and see” approach then has to file at the last minute, particularly if the EEOC requires pay data but does not extend the filing deadline.

The proactive approach also offers additional benefits.  First, this would allow employers an opportunity to develop and hone pay data collection processes that may be used in later reporting years in the event the district court decision is upheld on appeal.  Second, being proactive now will give employers insights into any potential real or perceived pay disparities that may exist (regardless of whether the EEO-1 pay data requirement is upheld).  As evidenced by the lawsuit challenging the OMB’s stay, several advocacy groups believe in the validity of W-2 wage information as a marker of pay disparities.  It is likely that similar type arguments will be made in court or before the EEOC.  Although they may not gain traction, it would be of value for employers to at least have some idea of whether W-2 pay data gives the appearance of a pay disparity and, if so, to take the time to identify the reasons why that appearance is not correct.  Or, alternatively, if a real pay disparity is identified, the employer could take action to equalize the pay.

The Bottom Line for Employers:

Large employers should monitor the forthcoming decisions from the EEOC (and possibly the court of appeals) as to whether and when 2018 pay data must be produced to the government.  In the meantime, large employers must decide whether to begin collecting and processing data. Of course, this proactive approach takes time and money to collect and analyze pay data and may, ultimately, prove unnecessary.  There is certainly an appeal to the wait and see approach for that very reason—it requires no additional effort beyond what will definitely be required.  Ultimately, each employer will have to decide the best approach for its unique circumstances, and should consult with legal counsel if there are any questions.