800-822-3694 REQUEST A QUOTE

A new proposal by the U.S. Equal Employment Opportunity Commission to collect pay data from all organizations with more than 100 employees would likely open up employers to further litigation and regulatory actions.

The EEOC says it wants to use this data to identify areas of possible pay discrimination. But this fresh trove of data would likely lead to litigation by employees who feel they are underpaid compared to their colleagues, and to administrative actions, according to employment law attorneys.

The commission already uses so-called EEO-1 reports to collect demographic data about employers’ workers, such as race, ethnicity, sex, and job category of employees. Under the proposal, starting in September 2017 it would also gather data on pay ranges and hours worked.

The EEOC and the Department of Labor would use this data to identify pay disparities across industries and occupations, and strengthen federal efforts to combat pay discrimination.

The agencies would also use the information to assess complaints of discrimination, focus agency investigations, and identify pay disparities that it could probe more deeply.

Under the proposed regulations, employers with more than 100 workers and who file the EEO-1 forms would be require to include on the revised form:

  • Total W-2 earnings.
  • Aggregate W-2 data in 12 pay bands (pay ranges) for the 10 EEO-1 job categories. Employers will count and report the number of employees in each pay band.
  • The total number of hours worked by the employees in each pay band. The EEOC intends to use this data to analyze pay differences while also taking into account the differences in hours worked, as well as accounting for part-time work. (Note: The EEOC made a point of saying it doesn’t want data about specific employees, and that the data will be kept confidential.)

 

EEOC investigators would analyze W-2 pay distribution within single organizations and compare that data to aggregate industry or metropolitan area data.

 

Employers react

Already there has been pushback from employer groups about the administrative burden this would put on businesses. And some have voiced concern that data could be misconstrued as it fails to take into account the subjective factors influencing pay, such as experience and skill.

According to a new report in Bloomberg BNA, the EEOC’s assurance that it will keep employers’ pay data confidential doesn’t necessarily mean it will. It interviewed one labor law attorney who said that the data could be subject to Freedom of Information Act requests.

There are also “serious questions” about relying on the W-2 data, as pay could be influenced by shift differentials, an employee’s willingness to work overtime and other factors, Greg Keating of Boston-based Choate, Hall & Stewart L.L.P. said.

An employee’s W-2 form “doesn’t tell the whole story by any means,” he said, adding that pay differences within pay bands also can occur for many reasons that have nothing to do with gender or race bias.

So, the data on which the EEOC intends to rely is “quite suspect” as an indicator of any unlawful practice, Keating said.

Another attorney, Stanley Pitts, a partner with Honigman Miller Schwartz & Cohn L.L.P. in Detroit, told Business Insurance magazine that the EEOC is most interested in probing higher-paid categories and “trying to look at the ‘glass ceilings’ for gender or pay discrimination.”

 

The takeaway

At this point, it’s unclear how the EEOC might use this data, but employers can nonetheless take some preemptive action.

The law firm of Thompson Coburn LLC in a recent blog recommends that employers with more than 100 workers examine their payrolls to identify any inadvertent pay differences and to compare the pay rates of similarly situated employees when changing workers’ salaries.

The law firm also recommends that employers that currently must submit EEO-1 reports conduct self-audits of their payrolls to identify any areas where they could be vulnerable to litigation for unequal pay practices.

The public has until April 1 to submit comments on the proposed rules.