Last January, the Obama Administration proposed executive action through the Equal Employment Opportunity Commission (“EEOC”), the federal watchdog for employment discrimination statutes, to require certain businesses to provide information on how much their employees were paid. This information was to be broken down based on race, gender, and ethnicity. In theory, this would allow the EEOC to easily identify pay disparities between genders. Many employers expressed serious concerns regarding the burden the data collection would cause, and on June 22, 2016, the EEOC announced it would issue a revised version of the rule, taking into account these burdens.
On July 13, 2016, the EEOC issued its revised rule. The comment period ended on August 15, 2016. The rule was made final on September 29, 2016. The revised rule did little if not nothing to address employers concerns. However, it did answer a few outstanding questions. In summary, the revised rule (which is now final) directed employers to use Box 1 on an employee’s W-2 form as the measure of reportable compensation on the upcoming EEO-1 Reports. The revised rule also clarifies that the 2017 EEO-1 Report is the first EEO-1 Report that requires this information. That deadline is March 31, 2018. Details of the revisions to the rule follow.
The Final Rule:
Who Is Required to Report Pay Data?
Employers with 100 or more employees must report aggregate W-2 income by sex, race, ethnicity, and job group.
What Information Are Employers Required to Report?
Employers must report summary W-2 income by sex, race, ethnicity, and job group:
Employers should tally the number of employees in 12 pay bands for each EEO-1 job category.
For each pay band, employers should enter the number of employees whose W-2 pay for the calendar year falls in that band.
Employers should report summary pay data. Employers should not report individual pay or salaries.
Hours Worked: To account for part-time and partial-year employment, employers would report hours worked.
The EEOC is using the Fair Labor Standards Act (FLSA) definitions for exempt and non-exempt workers.
For FLSA nonexempt workers, employers would report the hours worked as recorded for FLSA purposes.
For FLSA-exempt workers, employers would have a choice: report (1) 40 hours per week for full-time workers, and 20 hours per week for part-time workers, multiplied by the number of weeks employed that year; or (2) actual hours-worked based on data that they employers already keep. Employers will not be required to collect actual hours worked for exempt workers if they do not already keep it.
While employers have 18 months to prepare the new EEO-1 form, now is the time to prepare. We expect most payroll companies will offer assistance in gathering this data. Many HR IS systems may do the same. Do a dry run well in advance so when the deadline finally arrives, you are prepared.