EEOC Pay Data Proposal Draws Criticism and Applause

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By Kevin McGowan

April 12 — The Equal Employment Opportunity Commission should withdraw or substantially revise its proposal to collect compensation data yearly from companies with 100 or more employees, employment representatives said in comments to the agency.

The EEOC's plan to have employers submit summary pay data grouped by sex, race and ethnicity as part of the annual employer information report (EEO-1) is unlikely to unearth evidence of unlawful discrimination and will impose burdens on employers unjustified by any potential benefits, the business groups said.

But civil rights and women's rights groups, labor organizations and House Democrats that contacted the EEOC during a 60-day comment period that ended April 1 applauded the agency's proposal as a potentially useful step in shrinking a persistent gender and race pay gap.

The EEOC's proposed use of the EEO-1 form, which employers have been filing with the agency for decades, and its use of W-2 wage information should ease the burdens on covered employers, the supporters said.

The EEOC received more than 320 comments on its proposal to revise the current EEO-1 form, which the agency announced Jan. 29 .

The White House Office of Management and Budget must review and approve any EEO-1 revision under the Paperwork Reduction Act. The EEOC hopes to approve final revisions to the EEO-1 form by September and to require employers to begin submitting the summary pay data in September 2017.

The EEOC March 16 heard varied views on its proposal from witnesses representing employers, civil rights groups, academics and small business .

Group Says EEOC Didn't Lay Groundwork

The Equal Employment Advisory Council said the EEOC mostly ignored a National Academy of Sciences' report, which in 2012 recommended that the agency develop a comprehensive plan for using pay data, conduct a pilot study to test the utility of any proposed collection tool, and use base pay as the measure before requiring employers to submit pay data .

The EEOC's failure to follow those recommendations compromises both the usefulness of the proposed data collection and its burden estimates, said the EEAC, which represents large employers.

A pilot study conducted for the EEOC used “synthetic data” culled from a federal database rather than real pay data collected from a representative sample of employers, the EEAC said. Rather than develop a “comprehensive plan” for proposed use of the pay data, the EEOC simply states that the data will aid its anti-discrimination enforcement efforts, the group said.

The EEOC should withdraw its proposal and seek OMB approval to conduct a valid pilot study, the EEAC said.

Alternatively, the agency should revise its proposal and seek employers' information on base pay rates or annualized compensation rather than W-2 wage data, the EEAC said.

The NAS report recommended analysis of base pay and advised against the use of pay bands, the EEAC noted.

Instead, the EEOC would force employers to generate W-2 wage data on a basis other than the calendar year and examine the pay data in 10 broad job categories sliced into 12 pay bands, the EEAC said.

Are W-2 Wages the Best Measure?

Critics and supporters of the EEOC proposal sharply disagreed about whether W-2 wage data is a useful measure for making pay comparisons and unearthing potential sex or race bias.

Supporters said the W-2 data provide the most comprehensive information on employee pay, offering a “true picture” of what workers actually earn, in contrast to base pay, which doesn't include commissions, bonuses, overtime pay, shift differentials and the like.

By collecting W-2 wage data, the EEOC and the Labor Department's Office of Federal Contract Compliance Programs can analyze employer practices, such as sex- or race-based disparities in overtime opportunities or bonuses, that couldn't be gleaned from base pay alone, the National Women's Law Center said.

The American Association of University Women also favored the use of the W-2 data. Employers already generate this information for the Internal Revenue Service and Social Security Administration, which should limit the burdens on covered businesses, the group said.

The EEOC responded to employers' expressed concerns about the OFCCP's proposed Equal Pay Report for federal contractors by proposing to collect pay data through the EEO-1 form and using W-2 wages, the AAUW said. Using a form that employers already file to report pay data they already collect eliminates redundancy and enhances federal agency collaboration, the AAUW said.

But the Retail Industry Leaders Association said the W-2 obscures as much as it reveals about compensation. For example, a female employee at the exact same pay rate as a male colleague could have lower W-2 earnings because of individual choices regarding overtime, 401(k) plan contributions or health plan coverage, the retail group said. “The use of W-2 wages as the measure of compensation further decreases the low likelihood that the EEOC's proposal will accurately identify employers engaged in pay discrimination,” the RILA said.

The National Association of Manufacturers also criticized using the W-2 data. The EEOC would require employers to report W-2 earnings as of Sept. 30 each year, effectively requiring a new W-2 report different from employers' calendar-year reporting to the IRS, the group said.

The EEAC said that if the EEOC proceeds, it should allow employers to report the W-2 wage data on a normal calendar-year basis.

The agency also should drop a requirement that employers report the cumulative hours worked within the different job categories, the business groups said. That would require employers to start tracking exempt, salaried employees' hours or to submit hours-worked estimates that would skew the pay data, they said.

Disagreement on Burdens

The EEOC vastly understates the time and money that employers will spend completing the revised form, NAM said.

The EEOC estimates that employers currently spend 3.4 hours filling out the EEO-1 forms for all their establishments. Employers will spend an estimated 6.6 hours to complete the revised EEO-1 form including the summary pay data, the agency said. Employers also will spend an estimated eight hours one time to configure their human resources information and payroll systems to capture the new compensation data, the EEOC said.

“These estimates are woefully inadequate,” NAM said. The EEOC cites no evidence to support its time and cost estimates for preparing and filing the revised EEO-1, the manufacturers' group said.

Employer burdens should be minimal because the agency proposes to collect W-2 wage data that employers already prepare for other federal agencies, and the sex, race and ethnicity categories already appear on the current EEO-1 form, the EEOC said.

But the revised EEO-1 form would require W-2 wage data for a different reporting period; employers' payroll and human resource information systems don't necessarily “talk” to each other; and the EEO-1 revised form represents a 2,400 percent increase in the fields to be completed, NAM said.

Employers' costs for developing custom software solutions to meet the EEOC's new data demands probably will greatly exceed the agency's estimates, NAM said.

Employers will get another chance to discuss potential burdens after the EEOC sends its proposal to the OMB, when a new 30-day comment period will be triggered.

To the extent that reporting employees' hours is a new requirement, the EEOC said employers can use a 40-hour week or other estimate for exempt employees' hours. Employers won't have to begin tracking the hours of exempt employees, supporters of the proposal said.

Confidentiality a Big Concern

Doubts about the EEOC's ability to keep employers' pay data confidential were repeatedly raised by business groups that commented.

Although Title VII of the 1964 Civil Rights Act makes EEOC employees subject to criminal penalties if they publicly disclose EEO-1 reports, the EEOC would be sharing the pay information with the OFCCP and the Justice Department, whose employees aren't subject to the Title VII sanction, the business groups said.

The OFCCP is subject to the Freedom of Information Act, which shields trade secrets and proprietary information from disclosure, but those exemptions depend on an alert employer actively objecting to disclosure, the EEAC said.

The Construction Industry Round Table said that the federal government has a spotty record in shielding sensitive information from computer hackers, as shown by an Office of Personnel Management security breach that exposed the records of 21 million former and current federal workers.

Employers' pay information, even in summary form, could be an attractive target for hackers, the construction group said.

There's also a risk that in a job category or pay band with very few female or racial minority employees, an individual's pay data effectively would be disclosed, some commenters noted.

But Rep. Bobby Scott (D-Va.) said that in the 50 years the EEOC has collected EEO-1 reports, “there has not been a single complaint” about the security of the information. Scott is ranking Democrat on the House Education and the Workforce Committee.

If employers are concerned about the EEOC's and OFCCP's ability to protect this data, the comment periods provide “ample time” for confidentiality issues to be addressed, Scott commented.

The EEOC should include a section in its final proposal that explains how the agency and the OFCCP will shield the data, he said.

A group of 78 House Democrats separately lauded the EEOC's proposal. Collection of “robust” pay data is “necessary to shine a light on pay practices, reveal trends and support employers in proactively improving systems and closing gaps,” the Democrats said.

Broader Pay Data Sought

Supporters of the EEOC proposal would tweak the revised EEO-1 form to require federal contractors with between 50 and 99 employees to submit the pay data, as well.

The EEOC should add pay bands at the top of the wage scale and narrow the large wage ranges in some pay bands to permit better analysis, some commenters said.

The EEOC proposes a top pay band of $208,000 and above, but the National Women's Law Center said more pay bands would catch possible sex and race discrimination affecting higher-paid employees.

The agency should collect earnings data in pay bands up to $360,000 per year, which would “ensure that meaningful pay data is captured” covering “virtually all” the workforce, the NWLC said.

The EEOC should act swiftly to ensure that the revised EEO-1 takes effect in 2017, the women's group said.

“Women cannot afford to keep waiting for change, nor can the families depending on women's earnings,” the NWLC said. “The powerful enforcement tool proposed by EEOC promises to make a real difference in closing the pay gaps that have shortchanged women for too long.”

To contact the reporter on this story: Kevin McGowan in Washington at

To contact the editor responsible for this story: Susan J. McGolrick at

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