On May 13, 2019, the Equal Employment Opportunity Commission (“EEOC”) announced that it will require larger employers to report information about their employees’ compensation during the 2017 and 2018 calendar years to the EEOC by September 30, 2019. This information must be organized by sex, race, and ethnicity of the employees.
This requirement applies only to employers who must file EEO-1 reports, i.e., private employers with 100 or more employees or federal contractors with 50 or more employees.
Until recently, the EEO-1 process only required employers to report information regarding the number of employees they employed by job category, race, ethnicity, and sex—also known as “Component 1” data. In 2016, the EEOC added a requirement for employers to report what it refers to as “Component 2” data: information about the compensation paid to their employees that is sorted by race, sex, ethnicity, and job category.
Because it was essentially a pilot program, this new requirement was limited to a three-year period between 2016 and 2019. During this three-year period, employers would have had to submit data on two separate occasions—one to cover the 2017 calendar year and another to cover the 2018 calendar year.
Before this new requirement could be implemented, the Office of Management and Budget (“OMB”) ordered the EEOC to stay its collection efforts. Several advocacy groups then filed a lawsuit challenging the OMB’s stay. See National Women’s Law Center v. Office of Management and Budget, et al., 358 F.Supp.3d 66 (D.C. Cir. 2019). Judge Tanya Chutkan of the U.S. District Court for the District Court of Columbia ultimately sided with the advocacy groups and vacated the stay. Judge Chutkan’s Order left the EEOC scrambling to construct and announce its collection process.
On April 3, 2019, the EEOC submitted a proposal to the Court, requesting that the Court approve its plan to require covered employers to submit only 2018 Component 2 data by September 30, 2019. The EEOC cited the fact that employers were not legally obligated to collect 2017 data due to OMB’s stay and the “serious risk” that expedited data collection may yield poor quality data.
On April 25, 2019, Judge Chutkan approved the EEOC’s proposed September 30, 2019, deadline for the submission of 2018 data. However, Judge Chutkan also required the EEOC to collect a second year of pay data. Her order required the EEOC to choose between collecting 2017 data simultaneously with its collection of 2018 data or setting a second deadline in 2020, at which time employers would be required to report 2019 data. The EEOC chose the first option.
This means employers are now facing a September 30, 2019, deadline by which they must report to the EEOC the compensation they paid their employees during both calendar year 2017 and 2018.
The problem is that the EEOC has not yet made clear the format in which it wants this information reported.
What we do know so far is that the revised EEO-1 form will require covered employers to report wage information (defined as the amount reported in box 1 of an employee’s W-2 form) and total hours worked for all employees. The EEOC expects the wage information to include the employees’ annual compensation as of the last week worked by the employee within the final quarter of the calendar year. This information must be broken down by race, ethnicity, and sex and then divided among 12 pay bands set by the EEOC. The reported hours worked should show actual hours worked by nonexempt employees. For exempt employees, employers may use a plug of 20 hours per work week for part-time exempt employees and 40 hours per week for full-time exempt employees.
The EEOC will still need to clarify the formatting that will be necessary to submit this information electronically. Employers should work with their information system providers to ensure that the required data components can be captured and reported by the September 30th deadline for both the 2017 and 2018 calendar years.
As a reminder, employees with 100 or more employees must still submit their 2018 data for Component 1 of the EEO-1 form by May 31, 2019.
This is a fast-changing situation, and employers should keep a close eye on it. If you would like to have a more in-depth discussion on the proposed rule or its likely effect on your employee’s duties and salaries, please contact us at your convenience.