Do You Practice Pay Discrimination? New Reporting Rules for Employers.

Do You Practice Pay Discrimination? New Reporting Rules for Employers.

As part of the President’s push to cement his policy legacy in his final year in office (see blog: 2016 Small Business Forecast:  A Flurry of Federal Regulations), his administration proposed a new rule last week designed to fight pay disparity in the workplace.  The Equal Opportunity Employment Commission (EEOC) rule will require companies to report pay information based on race, ethnicity and gender.  Here’s what you need to know:

Who will need to report data?

Employers, including federal contractors, with 100 or more employees, will be required to collect and report pay data.

What new information will need to be reported?

The EEOC already requires many employers to provide information about the number of workers they employ by race, ethnicity, sex and by job category.  This proposal will require the reporting of pay data as well.  Employers will use W-2 earnings, calculated based on a 12-month period, and report the number of employees who fall within one of 12 “pay bands” (that track those used by the Bureau of Labor Statistics in the Occupation Employment Statistics survey).  Using an EEOC example, a company might report that it “employs 10 African American men who are Craft Workers in the second pay band ($19,240-$24,439).”

How will the information be reported?

Businesses will need to include the pay data on their annual Employer Information Report (EEO-1). The EEO-1 is currently used by private-sector employers and most federal contractors to report their number and type of employees.  The proposal makes additions to the existing form.

When will the new rules take effect?

The EEO-1 is filed by employers annually by September 30.  The new rules would take effect for the reports filed in September of 2017.

What will the government do with the information?

The EEOC and the Office of Federal Contract Compliance Programs (OFCCP) at the Department of Labor (DOL) will use the information to judge the size and scope of the pay gap and target (and presumably increase) enforcement efforts. The EEO-1 data is also published, but in an aggregated way that does not identify any specific employer or employee information.

What are the next steps?

The rule is subject to public comment, and those comments will be accepted until April 1, 2016. When the final rule is approved, notice will be posted on the EEOC’s website, and EEO-1 respondents will be notified via correspondence.

Some in the business community are concerned that the requirements create a reporting burden without the benefit of collecting meaningful data since the data won’t reflect legitimate variables used to determine appropriate compensation.  Those concerns will likely be reflected in the comments filed with the agency.