248-409-1900 dburke@mi-worklaw.com

 By: Dan Cohen – 2/4/16

 If there was ever any doubt that the feds still have a bone to pick with employers, that doubt was easily put to rest last week when the EEOC announced its proposal to revise the annual Employer Information Report (EEO-1) to include pay data. Currently, employers with more than 100 employees, and federal contractors or subcontractors with more than 50 employees are required to provide the EEOC information about employee race/ethnicity and sex in each of 10 specific job categories.   The EEOC proposal would also require employers with 100 employees to report pay ranges based upon W-2 income as well as hours worked for all employees by race/ethnicity and sex beginning on or before September 30, 2017.

If your business is not required to file the EEO-1 now, it would not be required to file the EEO-1 with pay data. Under this proposal:

  • Federal contractors with 49 or fewer employees would not file the EEO-1. This is current practice.
  • Federal contractors with 50-99 employees would not report pay data. But they would report ethnicity, race, and sex by job category, like they do now.
  • Private employers with 99 or fewer employees that are not federal contractors would not file the EEO-1 at all. This is the same rule that applies now.

Public comments are due by April 1, 2016. Once the public comment period expires, the EEOC will review the responses. A hearing will be required before anything becomes final. Let’s hope common sense prevails and the feds adjust their proposal or scrap it altogether.

The EEOC has expressly stated that “collecting pay data is a significant step forward in addressing discriminatory pay practices.” Of course, the proposed reporting does not take into account length of service, employee responsibility education, experience, and other legitimate reasons for pay differentials. The EEOC Proposal also focuses on W-2 income rather than actual pay rates, which is the wrong data for ferreting out discriminatory pay practices.  For example, employees with greater productivity or more sales will typically be paid more than others in the same position.  This obviously does not establish an equal pay violation, but the EEOC proposal would lead to suspicion and possibly a costly investigation.  Perhaps the biggest problem with the proposal is the pay ranges themselves, which are based upon the 12 pay bands used by the Bureau of Labor Statistics in the Occupation Employment Statistics Survey.  Use of these 12 pay ranges will group employees together even though they are not similarly situated.  For example, the seventh pay band of $62,920 – $80,079 will tend to capture managers, sales representatives, administrators and even some professionals.  Consequently, employers will be defending their compensation systems at significant cost when the feds use this meaningless data in their targeted witch hunts.

Public comments are due by April 1, 2016. Once the public comment period expires, the EEOC will review the responses.  A hearing will be required before anything becomes final. Let’s hope common sense prevails and the feds adjust their proposal or scrap it altogether.