Republican Senators Urge OMB to Reject Pay Data Proposal

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By Kevin McGowan

Aug. 16 — The White House Office of Management and Budget should reject an EEOC proposal that would compel many employers to submit summary pay data and hours worked categorized by employees' sex, race and ethnicity, three Republican senators said.

The revised proposal to add the compensation data to the EEO-1 form submitted annually by employers and federal contractors would place significant new burdens on businesses that can't be justified under the Paperwork Reduction Act, Sens. Lamar Alexander (Tenn.), Pat Roberts (Kan.) and Johnny Isakson (Ga.) said in a letter to the OMB. The letter was dated Aug. 15 and released the next day.

The senators sent their letter as the OMB Aug. 15 completed a 30-day comment period on the EEOC's revised proposal to require employers and contractors with 100 or more employees to add the compensation data to the employer information reports, or EEO-1 forms, they submit annually to the EEOC.

Under the EEOC's revised proposal, covered employers would report aggregate wage data based on W-2 forms along with actual hours worked across 12 pay bands in 10 job categories based on a “snapshot” in the final quarter of 2017. The first EEO-1 reports with the compensation data would be due March 31, 2018.

The OMB received nearly 600 comments from individuals, business representatives, employee advocacy groups and unions responding to the EEOC's revised proposal.

During an earlier 60-day comment period that ended April 1, the EEOC received about 320 comments on its original proposal, which was published Feb. 1.

The EEOC also held a March 16 hearing at which various agency stakeholders testified on the proposed EEO-1 form revisions.

Burdens Eclipse Benefits, Employers Say

Employer representatives that commented to the OMB, including the OFCCP Institute, the Equal Employment Advisory Council and a 24-member group that included the U.S. Chamber of Commerce, the Retail Industry Leaders Association and the Society for Human Resource Management, said they still have serious concerns about the EEOC proposal.

The proposal to use W-2 wage data, rather than base pay or annualized compensation, means employers would have to retrieve and reconcile data from separate human resources information systems and payroll systems that don't “talk with each other,” said David Fortney, a management lawyer with Fortney & Scott in Washington.

The EEOC vastly underestimates the time and money employers would have to spend in developing and implementing software that would allow collection and analysis of data from completely different systems, Fortney told Bloomberg BNA Aug. 16.

A more fundamental issue with using W-2 wage data is that it doesn't align with how employers actually set up compensation systems, said Fortney, who submitted written comments on behalf of the OFCCP Institute in Washington, a group serving federal contractors.

Using base pay rather than W-2 wages, which include compensation resulting from employee choices as well as pay rates, would cover about 88 percent of employee pay, Fortney said.

He suggested the EEOC start with base pay, and examine other forms of compensation if a particular industry or employer relies heavily on alternative methods such as bonuses, stock options or the like.

Employers aren't opposed to pay equity but do object to the EEOC's “one size fits all” approach, Fortney said.

The EEOC's failure to follow the recommendations of a 2012 National Academy of Sciences report on government pay data collection remains a top concern among employer representatives.

The NAS panel recommended the collection of base pay. It said the EEOC should develop a “comprehensive plan” for using the pay data before collecting it and should conduct a pilot study to illuminate the potential burdens on covered employers.

But the agency is proposing to use W-2 wage data rather than base pay, has no comprehensive plan, didn't conduct a true pilot study and did no testing on actual employers to justify its burden estimates, the Equal Employment Advisory Council said in its written comments.

The EEAC, a Washington association representing large employers, urged the OMB to put the EEOC proposal on hold until the commission conducts a genuine pilot study that yields more accurate estimates of employers' potential burdens.

Confidentiality Remains Concern

Employers also remain concerned about the EEOC's ability to maintain the confidentiality of the employer pay data the agency proposes to collect and to publicize the information in aggregate form, said Mickey Silberman, a partner with Jackson Lewis in Denver.

The EEOC still hasn't really addressed the dangers that specific employers, or even particular employees, might be identifiable if only a few individuals appear in a particular job category or pay band, Silberman told Bloomberg BNA Aug. 16.

Employers hope the OMB “takes a careful look” at the burdens and utility of the EEOC's proposal, Silberman said.

The “increased focus on pay equity” might warrant some increased burdens on employers, but the EEOC hasn't done the work to produce a fair and accurate assessment of those burdens, Silberman said.

A switch to base pay or annualized compensation as the data collected and dropping the hours-worked component would greatly reduce employers' burdens while not diminishing the EEOC's access to useful pay data, he said.

AAUW Says Agency, Employers Both Win

The EEOC's revised proposal minimizes employers' burdens by allowing them to use the same W-2 wage information they already compile for federal tax purposes and to report the aggregate data on the familiar EEO-1 form, said Lisa Maatz, vice president of government relations with the American Association for University Women in Washington.

Data system programmers can devise ways to elicit and analyze information from employers' different internal systems, Maatz told Bloomberg BNA Aug. 16.

Employer programming of their human resources and payroll systems to provide the EEOC-requested data may mean startup costs, but “these aren't mom and pop operations,” Maatz said.

Rather, the EEO-1 pay data collection only applies to employers with 100 or more employees, she said.

The data collected will help the EEOC discern “patterns” in pay for particular industries or regions and improve not only the agency's enforcement efforts but also its technical assistance programs, Maatz said.

Covered employers will have to “look in the mirror” and conduct internal pay analyses, Maatz said. That can be a benefit for all parties, as employers can discover and address pay disparities before the government arrives at their door, she said.

Final Version Seen as Coming Soon

The EEOC is aiming to have a revised EEO-1 form completed by Sept. 30, an agency spokeswoman told Bloomberg BNA Aug. 16.

The OMB will review the latest comments and determine whether more changes are needed to the EEOC's proposal.

The EEOC will take all revisions into consideration and consult with the OMB if the budget office says there should be changes, the commission spokeswoman said.

Those contacted by Bloomberg BNA agreed it's likely the EEOC will produce a revised EEO-1 form with a pay data collection component by the November elections at the latest.

To contact the reporter on this story: Kevin McGowan in Washington at kmcgowan@bna.com

To contact the editor responsible for this story: Susan J. McGolrick at smcgolrick@bna.com

For More Information

The Republican senators' letter is available at http://src.bna.com/hK4 and the public comments to OMB are at https://www.regulations.gov/docketBrowser?rpp=25&so=DESC&sb=commentDueDate&po=0&np=30&D=EEOC-2016-0002.

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