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New Ruling Means Employers Must Report Pay Data

Employers need to prepare for their pay practices to be placed under a microscope.
By: | March 5, 2019 • 3 min read
pay data

Late Monday night, the U.S. District Court for the District of Columbia vacated a prior Office of Management and Budget’s order staying the implementation of the Obama-era revised EEO-1 Report which required employers to report W-2 wage information and total hours worked.

So how did we get here? According to a new legal alert from Fisher Phillips, over the past few years, there has been an ongoing battle at the federal level to determine whether the EEO-1 would also be used as a pay-data reporting tool.

According to the alert, the pendulum began to swing in 2016, when the EEOC proposed changes to the EEO-1 report that would require employers to include pay data and the number of hours worked for their workforces. The proposed reporting expansion was intended to identify pay gaps, which the agency could then use to target specific employers and investigate pay-discrimination practices. The revised form, revealed in October 2016, was to be submitted by employers by March 31, 2018, using a “workforce snapshot” of any pay period between Oct. 1, 2017 and Dec. 31, 2017.

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But the pendulum swung back in employers’ favor in August 2017, when the White House scrapped the revised EEO-1 report. The Office of Management and Budget announced that it had significant concerns with the revised reporting requirements, among them that “some aspects of the revised collection of information lack practical utility, are unnecessarily burdensome and do not adequately address privacy and confidentiality issues.”

The National Women’s Law Center and the Labor Council for Latin American Advancement sued both the EEOC and the OMB in November 2017 in order to revive the beefed-up EEO-1 report.

From the Fisher Phillips alert: “On Monday night, Judge Tanya S. Chutkan of the U.S. District Court for the District of Columbia issued a 42-page opinion in National Women’s Law Center v. OMB reviving the revised EEO-1 report. Chutkan determined that the OMB did not have good cause to change course because it could not demonstrate that any relevant circumstances warranting the action had occurred between the time the proposed rule was finalized and the time the revisions were cast aside. And although the OMB indicated that it did not believe the public had ample opportunity to review the proposals and offer meaningful comment, Judge Chutkan rejected this argument as ‘misdirected, inaccurate and ultimately unpersuasive.’ ”

So what’s next for employers?

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Judge Chutkan ordered the collection of pay data to go back into effect, noting that employers had over a year to prepare for the revised reports back in 2016-2017 and should have expected the possibility that the amplified EEO-1 could be resurrected. This means that most private employers with 100 or more employees will once again have to gather and submit compensation information broken down by race, sex and ethnicity to the EEOC in the very near future.

Fisher Phillips says employers should expect to hear from the EEOC about whether the 2018 EEO-1 reports—due to be submitted by May 31—will need to include this compensation information or whether employers will receive some sort of reprieve. “Whether this could come in the form of a delayed reporting timeframe or a delay in the revised report until next year is uncertain.”

Meanwhile, the law firm says it expects the OMB “to appeal the decision to the D.C. Circuit Court of Appeals and seek a delay of the revised EEO-1’s implementation while the appeal is pending.”

But while that process plays out, “employers should operate under the assumption that they will soon have to comply with the revised EEO-1 reporting rules,” the alert states. “This means that you should make it a priority to review current pay systems and identify and address any areas of pay disparity. It is critical to take steps now to minimize increased scrutiny that could soon come your way.”

Web Editor Michael J. O’Brien has been with HRE for more than a decade and holds a degree in economics from Boston College. He can be reached at [email protected]

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