On January 29, 2016, the Equal Employment Opportunity Commission (“EEOC”) announced that it was proposing a change to the reporting requirements of annual EEO-1 reports, which would require covered employers to report information on their employees’ pay.  If implemented, the changes will take effect with the September 2017 report.  The purpose of this proposed change is to assist the EEOC and the Department of Labor (“DOL”) in identifying possible pay discrimination.

Currently, federal contractors with 50 or more employees, and other private employers with 100 or more employees, must file an EEO-1 report by September 30^th of each year, listing the number of people they employ, sorted by ten job categories, by seven race and ethnic groups, and by sex.  So, for example, an employer might report that it employed fifteen African American men, twenty Caucasian men, five African American women, three Caucasian women, and one Hispanic woman in the Administrative Support Workers job category.

Under the proposed changes, all employers with 100 or more employees would also have to report the pay data of their employees, sorted by twelve pay bands.  (Federal contractors with between 50 and 99 employees would not have to report the pay data but would continue to report the race, ethnicity, and sex data by job category.)  The proposed changes will require covered employers to identify the employees’ total W-2 earnings for a 12-month period, looking back from any pay period between July 1^st and September 30^th.  For example, the employer could use aggregated W-2 data for the twelve months looking back from the first pay period of August of the reporting year.  The EEO-1 would take into account part-time employment or employment for only part of the year by requiring employers to report not only earnings but also aggregate hours worked.

Using the example above, the employer might now report that it employed fifteen African American men in the Administrative Support Workers job category in the pay band of $24,440 to $30,679, and that these employees worked a total of 10,000 hours during the reporting year.

The EEOC wants this data so that it can gain insight into pay disparities across industries and occupations and strengthen federal efforts to combat discrimination.  The EEOC and the DOL’s Office of Federal Contract Compliance Programs would use the pay data “to assess complaints of discrimination, focus agency investigations, and identify existing pay disparities that may warrant further examination.”

Some employers are rightfully concerned that the proposal’s additional reporting requirements would require them to add manpower and technology to compile the requested information.  Compounding this concern, the additional reporting, especially in light of the EEOC’s desire to use it to “identify existing pay disparities that may warrant further examination,” may open employers up to investigations and charges of perceived discrimination, even absent a complaint, based solely upon pay data that is provided without context.  There are many factors besides number of hours worked that affect an employee’s pay—such as seniority, training, experience, and education—that are not included in the report.  The proposed changes do not address how the EEOC would account for these factors.  Finally, some employers are concerned that the proposed pay reporting would allow their competitors to gain access to confidential pay information.

You can view the proposed changes at the Federal Register website.  The proposal is open for public comment until April 1, 2016.