Proposed EEO-1 Regulations on Pay Data—More Government Bureaucracy for Employers With Minimal Value

EEOC sealThe Equal Employment Opportunity Commission has recently proposed regulations adding pay data to the information that large employers must file on their annual EEO-1 form. If these regulations become final in their current form, as of September 30, 2017, employers with 100 or more employees will have to provide information about pay data and hours worked separately for each gender, race, and ethnic category defined on the EEO-1.

In the past, President Obama has added new requirements to federal contractors and subcontractors, including an increased minimum wage, protections for LTBT workers, mandatory paid sick leave, and pay transparency. These policies were all implemented through executive orders. But the new proposal to expand the data collected on the EEO-1 form goes far beyond federal contractors. All employers with 100 or more employees would be affected—data on over 60 million employees will be required.

The EEOC states in its announcement of this proposal that it plans to use this data to investigate discrimination complaints, identify pay discrepancies among males/females and minorities/non-minorities across various industries and job classifications, all in an attempt to discover discriminatory pay practices. The data will continue to be collected based on the ten broad job categories already used on the EEO-1 report and will be divided into 12 pay bands for each job category.

There is little value to the information to be provided on the EEO-1. If racial or gender pay disparities show up in the broad categories, both the EEOC and employees are more likely to file claims. But under current law, valid claims of employment discrimination on the basis of pay require disparities between races or genders in specific job titles. Moreover, there are many legitimate, non-discriminatory reasons for disparities even within a specific job title—such as tenure in the role, prior education and experience, performance, hours worked, etc. The EEO-1 data will not reveal any of these legitimate reasons for pay disparities. Many invalid claims of discrimination and lawsuits are likely to result.

In addition, gathering the EEO-1 data will be time-consuming for employers, not to mention the time spent defending claims and lawsuits based on incomplete information. Confidentiality of the data is also a concern.

The EEOC estimates that it will take each employer 3.4 hours to prepare the EEO-1 pay report annually, after an 8 hour set-up of the data collection system. This is a ludicrously low estimate. One day’s work to program every job into one of 12 job categories, assign every employee to the appropriate role, and calculate average salaries by race and gender? And then less than half a day of one person’s time to determine the accuracy of the report each year?

For all of these reasons, the EEOC’s plan to use the data to target its enforcement efforts and to focus wage discrimination investigations on pay disparities revealed by the aggregate pay data on the EEO-1s is unreliable and inefficient.

The EEOC also proposes to share its EEO-1 data with the Office of Federal Contracts Compliance Programs (OFCCP), which has also proposed collecting similar data. The OFCCP’s Equal Opportunity Survey (since rescinded) collected similar information, but a study of that survey showed that the data was not meaningful in identifying pay discrimination.

Although most corporate leaders would agree that pay decisions should not be made on the basis of race or sex or ethnicity, the value of the proposed regulations seems minimal. And the cost of the regulations and of prosecuting and defending the many claims and questions likely to be raised as a result of this broad-stroke solution does not seem directed at addressing specific pay-equity concerns.

Is your organization prepared to provide pay-equity data? If not, how much time and effort is required to become ready to do so?


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