by Tim Orellano
On September 29, 2016, the Equal Employment Opportunity Commission (EEOC) announced the revised EEO-1 that is required by all employers with 100 or more employees and all federal contractors (50 or more employees) to file a revised EEO-1 that will collect summary employee pay data by March 30, 2018.
The revised EEO-1 is very controversial and has received major push back comments from SHRM, business, industry trade groups, consultants, law firms, the National Chamber of Commerce and many others that the revised EEO-1 is burdensome, will cost millions of dollars to implement and that the justification and cost estimates by EEOC was not valid. On the other hand, civil rights groups have submitted comments that it is a way to uncover pay equity problems.
Under the prior white house administration, the EEOC’s five member board voted for the revision with the only dissenting vote by Victoria Lipnic who stated it was not the best way to address pay equity issues. President Trump has selected Janet Dhillon to serve as the next EEOC Chair and Commissioner. Dhillon was the general counsel of Burlington Stores and spent 13 years at Skadden Arps Slate Meagher & Flom LLP.
President Trump will have the ability to appoint one more Republican Commissioner once Jenny Yang’s term expires in July. It would take another majority vote to pull back the revised EEO-1 for further assessment of the cost and benefit which is what Ms. Lipnic has publically stated she believes is necessary. Until the one board appointment is made
So We Wait and See.
The Office of Budget and Management (OMB) is currently evaluating the revised EEO-1 based on requests from several business associations based on poor validation, cost and time to implement and the Paper Reduction Act.
So We Wait and See.
Congress could act by cutting their budget to fund the implementation of the new EEO-1.
So We Wait and See.
President Trump’s daughter, Ivanka, has publicly stated her interest in wage equality and childcare so We Wait and See.
What is involved in the revised EEO-1? It is not good.
On March 31, 2018, private employers, including federal contractors, with 100 or more employees must include summary compensation and hours-worked data in their annual EEO-1 report. Specifically, to report employees’ W-2 earnings and hours-worked data, broken down by gender, race, ethnicity, and by 12 pay bands in each of the 10 EEO job categories. If employees are exempt from overtime requirements and do not keep time records, then the employer may use 40 hours as a “proxy” (or 20 hours if an exempt employee is part-time). If exempt employees keep time records, the actual number of hours worked must be used. For nonexempt employees, the hours worked must reflect what actually appears in payroll records, including overtime hours.
Starting with the EEO-1 report of 2017 data, the “workforce snapshot period” will be October 1 to December 31, 2017. Each employer may choose any pay period during this three-month “workforce snapshot period” to count its full and part-time employees for the EEO-1 report. You will not file a 2017 EEO-1.
The W-2 pay would be reported in 12 “pay bands.” Employers would tally and report the number of employees whose W-2 pay for 12 months was in each pay band and for each EEO-1 job category by establishment. Of course, these pay band have nothing to do or is aligned with your compensation plan. Here are the pay bands:
(1) $19,239 and under;
(2) $19,240 – $24,439;
(3) $24,440 – $30,679;
(4) $30,680 – $38,999;
(5) $39,000 – $49,919;
(6) $49,920 – $62,919;
(7) $62,920 – $80,079;
(8) $80,080 – $101,919;
(9) $101,920 – $128,959;
(10) $128,960 – $163,799;
(11) $163,800 – $207,999; and
(12) $208,000 and over.
Employers would tabulate and report the number of employees whose actual total W-2 earnings for the prior 12 months fell within each pay band. For example, an employer would report on the total W-2 earnings in the EEO-1 that it employs 25 African American men who are Craft Workers in the third pay band ($24,440-$30,679).
According to EEOC most employers’ existing HRIS and pay systems include W-2 earnings data elements and should be an easy task. What!? Easy for them to say.
- Keep up to date with this issue. It could be late 2017 before we know anything definitively. Of course, I am monitoring this issue and will notify everyone as this issue progresses.
- Review your EEO job categories to ensure the job titles are properly classified in one of the ten EEO-1 job categories each position. I see many inconsistencies in job title classifications and this will have a major impact in the compensation portion of the revised EEO-1. Also double check you industry code since it will be used to target industries and companies for OFCCP or EEOC discrimination investigation.
- Review compensation policies to ensure that a gender bias does not persist and self audit your pay. As you know, I prepare a compensation summary analyses with your AAP. Should you uncover pay that cannot be explained for job related reasons, then we can prepare a more detail pay equity analysis under attorney-client privilege.
- Discuss with IT or your payroll vendor what system changes and payroll software can be cross-referenced with HR records of employees’ race, ethnicity, and sex. If the two databases cannot work together, create a reporting plan with appropriate internal timetables.
- Conduct a test in August to determine how the data necessary to complete the new EEO 1 form so that the technology systems are able to gather and manipulate the pay data in the ways required by the new EEO-1 Report.
- Review the new form. Take an aspirin first. Details about the Revised 2017 EEO-1 can be found here: https://www.eeoc.gov/employers/eeo1survey/2017survey.cfm
- Wait and See whether to not move forward with any final system changes until guidance is provided from EEOC on what the filing timeline and specifications will be. The EEOC may offer an extension if the pay component will be required in 2018, which would afford organizations the necessary time to appropriately set up or calibrate their systems to provide the required pay data.
The revised EEO- 1 is force feeding aggregate employees into the same pay band and then falsely conducting statistical analysis assuming all the employees are similarly situated in pay bands that are not aligned with an employers pay system and will imply great disparities in pay by definition.
Can you say there will be many false positives? There are many other problems with this revised form that this alert is not intended to cover such as how it will be used, access by third parties, unsubstantiated audit investigations by EEOC and OFFCP; and high cost to employers to defend to name a few.
Completing the new EEO-1 Report will be a costly and time-consuming endeavor. HR systems that are used to collect and track gender and race data may not be linked with the systems that track compensation and hours worked. March 2018 is only a few months away, which does not give you much time to confirm that systems will allow the collection and reporting of the required information or to make any necessary changes to those systems.
During the 2017 National Industry Liaison Group annual conference, that I was privilege to speak at, Commissioner Lipnic acknowledged that “time is of the essence” and contractors and employers need to know soon what will be done with the report so they can start making investments and system changes necessary to comply. She reported that in response to a petition by the U.S Chamber, the Office of Management and Budget is re-evaluating the burden estimate associated with the revised EEO-1 report. In connection with its review, Commission Lipnic shared she has written to the newly appointed head of the Office of Information and Regulatory Affairs (OIRA), the office within the OMB tasked with review of the report, pointing out the impeding March 2018 reporting deadline, requesting OIRA have a response by the end of month – before the Labor Day holiday. In Commissioner Lipnic’s words
“I have done everything I can think of to do to get people to focus on this.”
There are many unknowns about what will happen. So what can you do?
I urge everyone to review the EEOC web site Revised 2017 EEO-1 web site, contact your congress man/woman and OMB to express the cost and time involved your concerns about the revised EEO-1 report. Let your voices be heard and don’t wait to test your data systems.
If I can answer any questions and help you in any way, please don’t hesitate to give me a call. Thank you for the privilege to serve you.