NOTE FROM ROBIN: Last night, I posted briefly that the EEOC’s requirement, starting next March 31, that employers include compensation data in their annual EEO-1 reports had been suspended. We now have more information, and I have drafted a client bulletin that will go out this afternoon. Because the blog subscription and bulletin subscription lists are not identical, I’m reproducing the bulletin here for our blog readers.

EEO-1 “pay data” requirement is on hold

By Robin Shea
Winston-Salem Office

As we have reported previously, the Equal Employment Opportunity Commission was going to require employers of 100 or more employees (and federal contractors with 50 or more employees) to include compensation data with their annual EEO-1 reports. The EEO-1 filing deadline of September 30, 2017, was moved to March 31, 2018 (with reports to be due on March 31 every subsequent year).

Yesterday, the Office of Information and Regulatory Affairs, a branch of the Office of Management and Budget, “stayed” the requirement that employers provide compensation data. According to a memorandum sent yesterday from Neomi Rao, Administrator of the OIRA, to Victoria Lipnic, Acting Chair of the EEOC, the EEOC may continue to use the new form, but only to collect the “traditional” EEO-1 information (the number of employees by race, sex, and ethnicity in each of the 10 EEO-1 categories).

The EEOC has said today that it will leave the March 31 EEO-1 reporting deadline in place.

The compensation reporting requirement came about during the Obama Administration under then-EEOC Chair Jenny Yang. Ms. Lipnic, now the Acting Chair, generally opposed the requirement. Employer and business groups, while agreeing with the goal of achieving pay equity, generally opposed the rule. Among the most prominent opponents were Congressional Republicans and the U.S. Chamber of Commerce.

The Rao Memorandum cites a number of problems with the new form:

1) The EEOC issued data file specifications for employers to use but did not provide notice and an opportunity for public comment.

2) The EEOC’s estimate of the burden to employers of complying with the rule did not take into account the data file specifications, and thus the estimate was inaccurate. (According to an April 2017 letterfrom Sens. Lamar Alexander (R-TN) and Pat Roberts (R-KS) to the OMB, the EEOC’s estimate of the burden was $54 million in costs and 1.9 million hours. The Chamber’s estimate was more than $400 million in direct costs and more than 8 million hours.)

The Memorandum concluded that the pay data collection requirement “lack[ed] practical utility, [was] unnecessarily burdensome, and [did] not adequately address privacy and confidentiality issues.”

Other concerns, raised by the Alexander-Roberts letter, included data privacy and data security. According to the letter, the form “will collect vast amounts of sensitive employee compensation information from thousands of employers – information which in the hands of bad actors could cause irreparable harm to American workers and employers.”

Ms. Rao was quoted by Bloomberg BNA as saying that the information to be collected would not have assisted in detecting pay discrimination in any event. As an example, she noted that physicians and nurses would be included in the same “professionals” category so that it would be impossible to determine whether lower-compensated women were victims of pay discrimination or simply holding lower-paying nursing positions.

The Rao Memorandum directs the EEOC to do the following:

1) “[S]ubmit a new information collection package for the EEO-1 form to OMB for review.”

2) “[P]ublish a notice in the Federal Register announcing the immediate stay of effectiveness of the wages and hours worked reporting requirements contained in the EEO-1 form . . ..”

3) In the Federal Register notice, “confirm[] that businesses may use the previously approved EEO-1 form in order to comply with their reporting obligations for FY 2017.”

We will provide updates as we get more definitive direction from the government on how to proceed. Again, employers can continue to observe the March 31 deadline, and can use the latest version of the EEO-1 form but can leave the salary information portion blank.