September 30th deadline to provide pay data to EEOC

Following an April 25, 2019 federal court ruling, employers with 100 or more employees should begin to prepare to report pay data to the U.S. Equal Employment Opportunity Commission (EEOC) by September 30, 2019.  While there is a possibility that an appeals court could stay this reporting requirement before then, covered employers should operate under the assumption that they will need to meet this September 30, 2019 deadline.

Background on pay data reporting requirement

Under current law, employers with 100 or more employees and federal contractors with 50 or more employees are required to file an annual Employer Information Report (EEO-1) that includes data on the race, ethnicity, and sex of their employees, broken down by job category.  As we previously reported in 2016 in our legal update EEOC Proposes Adding Pay Data to EEO-1 Report, the EEOC published a proposed revision to the EEO-1 that would require employers with 100 or more employees to provide employee pay data in the EEO-1 (note that federal contractors with 50 to 99 employees would continue to be subject to the same EEO-1 reporting requirements as before, but would not be required to provide the new employee pay data).  Using the reported information, the EEOC would compile and publish aggregate pay data to help employers analyze their own pay practices and for federal agencies to assess discrimination complaints, focus agency investigations, and identify existing pay disparities for further investigation.   A version of this proposal was approved by the Office of Management and Budget (OMB) later in 2016, and is often referred to as “Component 2” of the EEO-1.  However, the Component 2 proposal was met with criticism from employers and advocacy groups, and in response, in August 2017, the OMB announced that it was staying the Component 2 pay data reporting requirement before it went into effect.

Recent federal court rulings revive pay data reporting requirement

A few months after the proposal was stayed, several advocacy organizations sued the EEOC and OMB to revive the pay data reporting requirement.  On March 4, 2019, Judge Tanya Chutkan of the U.S. District Court for the District of Columbia ruled that the OMB had issued the stay without good cause, and lifted the stay on the Component 2 pay data reporting requirement.  On April 25, 2019, Judge Chutkan issued a ruling from the bench that employers with 100 or more employees must provide the EEOC with the Component 2 pay data by September 30, 2019.  Judge Chutkan ordered that the Component 2 pay data be collected for calendar year 2018, and she also ordered that a second year of pay data be provided.  However, for the second year of pay data, Judge Chutkan’s ruling gave the EEOC the option of either collecting retrospective 2017 pay data by September 30, 2019, or collecting 2019 pay data during the normal 2020 EEO-1 reporting period.  The EEOC has until May 3, 2019 to announce its decision on the time period for which they will require this second year pay data to be provided.  Judge Chutkan also ruled that the EEOC must keep its Component 2 website portal open for employers to be able to submit the Component 2 data electronically, and must immediately begin implementing steps for collecting data and notifying employers of these requirements.  See our prior legal update New EEOC pay data deadline: September 30, 2019 for further information on Judge Chutkan’s most recent ruling.

Employers should prepare to report pay data by September 30, 2019 deadline

While there is the possibility that the OMB will appeal Judge Chutkan’s decision and seek a stay pending an appeal, covered employers should move forward under the assumption that they will need to report pay data to the EEOC by September 30, 2019.  Employers should also keep in mind that they are still required to submit their 2018 data for Component 1 of the EEO-1 by May 31, 2019.

It is likely that, to complete Component 2 of the EEO-1, employers will be required to provide employee wage information from Box 1 of Form W-2 and information on hours worked by all employees by race, ethnicity, and sex, reported within twelve proposed pay bands.  The EEOC has stated that it will open the Component 2 website portal by July 15, 2019, and will offer training sessions and additional guidance to employers on the new reporting requirements.  Employers should stay tuned for further information from the EEOC in the coming weeks.  It would certainly be easier on employers if they are not required to report 2017 pay data as well as 2018 pay data by September 30, 2019.  However, until the EEOC announces its decision on 2017 pay data on or before May 3, 2019, employers should focus on reviewing their 2018 data and determining how the information will be culled and compiled into the Component 2 form.  Employers will need to determine how employee W-2 data will be separated into the twelve pay bands for each of the EEO-1 categories, and review how the data looks.  If employers identify any areas of pay disparity in the data, they should consider taking steps to address them.

Next steps for employers to take now

Employers should consider working with employment counsel to conduct an initial internal review of their pay data, so that if any pay disparities are identified, they have the protection of the attorney-client privilege as much as possible.  By conducting an internal pay data audit with counsel, employers may be able to address any pay disparities that would cause government scrutiny when reported to the EEOC.  If employers act quickly, they may be able to determine whether any identified pay disparities can be corrected, or justified by legitimate and non-discriminatory business reasons.  We recommend consulting employment counsel as early as possible in this process.

Please contact us with any questions.  Our employment team at Norton Rose Fulbright would be happy to assist your company with these new pay data reporting requirements.

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