Show Me the Money: EEOC Proposal to Require Federal Contractors and Private Employees to Report Pay Data

Coming on the heels of the Office of Federal Contract Compliance Programs’ (OFCCP) rule forbidding federal contractors from discriminating or retaliating against applicants and employees who inquire, disclose or discuss compensation, the EEOC issued proposed new regulations (the Proposed Regulations) that, if adopted, will require certain federal contractors and private employers to provide pay data to the EEOC and OFCCP through an EEO-1 report. The Proposed Regulations can be found here. Employers can submit comments to the EEOC regarding the Proposed Regulations until April 1, 2016.

Currently, most federal contractors and subcontractors who employ 50 or more employees and private employers who employ 100 or more employees must file an EEO-1 report containing employee data by job category, ethnicity, race and sex. These Proposed Regulations would also require federal contractors and private employers with 100 or more employees to report, starting in September 2017, their employee’s total W-2 earnings and hours worked. This information would be reported across 10 job categories and by 12 pay bands. However, it will not require the reporting of individual salaries or wages.

These Proposed Regulations reflect the EEOC’s focus on enforcing equal pay laws, a priority addressed in the EEOC's 2013-2016 Strategic Enforcement Plan. However, there appear to be some significant issues with the Proposed Regulations.

First, the EEOC states that the Proposed Regulations do "not compel employers to collect new data;" however, many employers do not have systems in place that tracks pay data, and most employers do not track the hours that their salaried-exempt employees work.

Second, the pay data will only be linked to job categories and hours worked. The Proposed Regulations do not address how, or if, the agencies will analyze the data to take into account the variety of jobs within each broad, generic EEO-1 category or other legitimate job-related factors that play into compensation decisions such as performance, level of education or seniority. For example, law firms, accounting firms and other professional companies who employ associates would have to report the aggregate W-2 earnings and hours worked for these associates under the "Professionals" category in the EEO-1 report. However, there would be no way to explain in the EEO-1 report the wage differences between a first-year associate and sixth-year associate or between associates of different practice areas.

Nonetheless, if the Proposed Regulations become effective, the EEOC and the OFCCP surely will attempt to use the data to help identify possible systemic pay discrimination. Employers also can expect the agencies to use the pay data when conducting investigations into a company’s pay practices, possibly without a formal complaint.

Several states have recently passed more aggressive equal pay laws. See, for example, http://www.bipc.com/new-york-strengthens-equal-pay-protections. These statutes, coupled with the EEOC's and OFCCP's focus on systemic pay discrimination, highlight the importance of employers examining their own pay practices and being prepared to explain and validate pay disparities.