Questions and Answers Notice of Proposed Changes to the EEO-1 to Collect Pay Data from Certain Employers: Public has 30 Days to Submit Comments to the Office of Management and Budget

On July 14, 2016, the Equal Employment Opportunity Commission (EEOC or Commission) published a revised proposal to add pay data to the EEO-1 employer information report (EEO-1), a longstanding joint information collection by the EEOC and the Department of Labor's Office of Federal Contract Compliance Programs (OFCCP). The EEOC published its proposal to modify this report on February 1, 2016, for a 60-day public comment period. The EEOC received 322 comments from individuals, employers, organizations, and members of Congress. The July 14, 2016, revised proposal considers this feedback and proposes changes to when and how pay data will be collected. An example of the proposed EEO-1 form is available at http://eeocsurvey.com/eeo1newform/index.html. Public comments may be submitted until August 15, 2016, as specified at https://federalregister.gov/a/2016-16692.

BACKGROUND

1. What is the EEOC's and OFCCP's authority to collect pay data?

The EEOC's mission is to stop and remedy unlawful employment discrimination, which includes pay discrimination, under laws including Title VII of the Civil Rights Act of 1964 and the Equal Pay Act of 1963. OFCCP enforces Executive Order 11246, which prohibits federal contractors and subcontractors from discriminating based on race, color, religion, sex, sexual orientation, gender identity, and national origin. Title VII and Executive Order 11246 provide authority for the collection of EEO-1 data.

2. How do the EEOC and OFCCP use their authority to enforce the laws against employment discrimination, including pay discrimination?

The EEOC's authority includes investigating charges of discrimination that individuals file with the agency, under Title VII, the EPA, and the other laws it enforces. Some of these charges allege pay discrimination or allege discriminatory access to overtime or premium pay hours, or other elements of compensation that impact pay. OFCCP also investigates complaints of pay discrimination and conducts compliance reviews of federal contractors.

3. Is pay discrimination still a problem?

While there has been progress in combatting pay discrimination, recent studies show that discrimination plays a role in explaining persistent pay gaps that are correlated with sex, race, and ethnicity. For example, studies have found racial bias in salary negotiations even after controlling for the applicants' objective qualifications. Another study found that women who engage in pay negotiations are more likely than men to face backlash due to gender stereotypes. Studies also have found that, after controlling for factors such as education and work experience, pay declines when women enter an occupation dominated by men but that pay increases when men enter a field dominated by women.

4. What is the EEO-1 report and why will it be used to collect pay data?

For over 50 years, most employers annually filed the EEO-1 report, which provides demographic information about the workforce. The EEO-1 groups employees into 10 job categories, and then counts them by sex and also by Hispanic or Latino ethnicity and race (including White, Black, and Asian American and Pacific Islander). Federal contractors with 50 or more employees and other private employers with 100 or more employees now file the EEO-1.

Using the EEO-1 to collect pay data avoids burdening federal contractors with two pay reporting requirements. Because the EEO-1 has been used for over 50 years, employers already understand it and have systems in place to complete the reports. Human Resource Information System (HRIS) vendors offer products that include EEO-1 recordkeeping and reporting tools, including pay recordkeeping tools. The EEOC also has an online portal for accepting EEO-1 data and a system for reviewing submissions.

5. How will the EEOC use the pay data?

The collection of pay information on the EEO-1 report will help the EEOC improve its enforcement efforts to combat pay discrimination, identify trends, and help employers assess their pay policies and practices. EEO-1 pay data will be used to better focus resources and investigations, not as the sole basis to find discrimination. A finding of discrimination could come after an investigation.

THE PROPOSED EEO-1 DATA COLLECTION

6. Who will submit pay data on the proposed EEO-1?

Employers, including federal contractors, with 100 or more employees will be required to submit pay data. Federal contractors with 50-99 employees will not report pay data and will continue to submit workforce demographic information by race, ethnicity, sex, and job category for the EEO-1. Federal contractors with 1-49 employees, and other private employers with 1-99 employees, do not now file the EEO-1 and will not be required to file the EEO-1 in the future.

7. When will the EEO-1 with pay data be due?

The 2017 EEO-1 report will be the first one to include pay data. All EEO-1 respondents will be required to submit the 2017 EEO-1 report by March 31, 2018. This is a six-month extension from September 30, 2017, which the EEOC originally proposed. The EEOC is providing more time to employers and HRIS vendors to change their EEO-1 recordkeeping and reporting. Each EEO-1 report, starting with 2017, will be due on March 31st of the following year, to coordinate with employers' end-of-year income reporting obligations.

The 2016 EEO-1 reporting deadline of September 30, 2016, remains unchanged.

8. What will be the measure of pay for the EEO-1?

W-2 Box 1 income will be the measure of pay. It will be calculated on a calendar year basis, ending December 31st. Employers can use the W-2 Box 1 income figure calculated for end-of-year tax reporting purposes. Employers will not be asked to calculate a special W-2 income figure for an EEO-1 reporting year of October 1 to September 30. This change will ease reporting requirements for employers.

The EEOC decided to use W-2 income after carefully considering feedback from stakeholders. Supplemental pay, such as overtime, premium pay, and bonuses, is increasingly common in business today, and the EEOC cannot overlook its importance in a pay survey. Supplemental pay can reflect discrimination in an employer's decisions and policies, for example, discriminatory assignments for overtime and more lucrative shifts.

9. Will hours worked by employees be reported on the EEO-1?

Yes. Hours-worked data will be reported to account for part-time and partial year employment.

For non-exempt employees under the Fair Labor Standards Act (FLSA), the EEOC will require data on hours worked, which employers already report for FLSA purposes.

For exempt employees, the EEOC will provide employers with the option to either (a) report actual hours worked by exempt employees if the employer already maintains accurate records of this information; or (b) report a proxy of 40 hours per week for full-time exempt employees and 20 hours per week for part-time exempt employees multiplied by the number of weeks the individuals are employed during the EEO-1 reporting year.

10. What is the format for reporting W-2 income and hours worked data?

W-2 income and hours-worked data will be reported by tallying the number of employees, and the total number of hours these employees worked during the calendar year, for each of the 12 pay bands in each of the ten EEO-1 job categories.

The 10 EEO-1 job categories are: Executive/Senior Level Officials and Managers; First/Mid-Level Officials and Managers; Professionals; Technicians; Sales Workers; Administrative Support Workers; Craft Workers; Operatives; Laborers and Helpers; and Service Workers.

The pay bands track the 12 pay bands used by the Bureau of Labor Statistics in the Occupation Employment Statistics survey:

(1) $19,239 and under;
(2) $19,240 - $24,439;
(3) $24,440 - $30,679;
(4) $30,680 - $38,999;
(5) $39,000 - $49,919;
(6) $49,920 - $62,919;
(7) $62,920 - $80,079;
(8) $80,080 - $101,919;
(9) $101,920 - $128,959;
(10) $128,960 - $163,799;
(11) $163,800 - $207,999; and
(12) $208,000 and over.

The EEOC carefully considered stakeholder feedback regarding the use of these established job categories and pay bands. The proposal seeks to balance the burden on employers with the utility of the data collected, with the understanding that EEO-1 data will be used along with additional information gathered during the course of an investigation.

CONFIDENTIALITY

11. What steps does EEOC take to protect the confidentiality of this data?

EEO-1 pay and hours-worked data will be held in confidence by EEOC and OFCCP to the maximum extent permitted by law. Both agencies are subject to the Trade Secrets Act and the Freedom of Information Act (FOIA). FOIA Exemptions 3 and 4 and the Trade Secrets Act establish legal standards that appropriately protect such data from public disclosure.

In addition, Title VII prohibits the EEOC or any EEOC officer or employee from making public any information, including EEO-1 data, before a Title VII proceeding is instituted that involves that information. EEOC staff who violate this prohibition are subject to criminal penalties, including imprisonment.

The EEOC directly imposes Title VII confidentiality on all of its contractors. With respect to other federal agencies with a legitimate law enforcement purpose, the EEOC provides access to information collected under Title VII only if the agencies agree, by letter or memorandum of understanding, to comply with the confidentiality provisions of Title VII. Title VII only permits the EEOC to share local data with state fair employment agencies if those agencies keep the data confidential.

The EEOC also complies with a comprehensive set of security and privacy controls to protect EEOC's operations and information system. These controls protect the confidentiality and privacy of employer EEO-1 data that is in the EEOC's possession.

THE PAPERWORK REDUCTION ACT

12. What is the Paperwork Reduction Act (PRA) and why is it relevant to this EEO-1 revision?

Since 1995, the PRA has required federal agencies to submit all proposed collections of information for review and approval by the Office of Management and Budget (OMB). The EEO-1 is an information collection. This PRA approval process typically requires two-steps.

1. Prepare and publish a notice in the Federal register ("60-day notice") notifying the public of the proposed information collection, calculating the annual burden hours it will take respondents to complete the information collection, and the one-time implementation cost for establishing the collection. This Notice solicits public comment for a 60-day period; and
2. Submit the proposed information collection for OMB approval ("30-day notice") notifying the public that the request has been submitted to OMB, describing the information collection and again estimating both its annual and one-time implementation burden, and soliciting public comment for an additional 30-day period.

EEOC published the 60-day notice on February 1, 2016, and the comment period closed on April, 1, 2016. As stated above, the Commission received 322 comments. In addition, EEOC held a public hearing on March 16, 2016, and heard testimony from a variety of witness on its proposal. More information about the public hearing can be found at https://www.eeoc.gov/eeoc/meetings/3-16-16/ .

EEOC is now requesting comment on the updated proposal during a 30-day public comment period. Comments must be submitted by August 15, 2016. Please refer to the July 14, 2016 Federal Register Notice for further details.

13. How long will the review and approval process take?

OMB is responsible for reviewing and approving the revised EEO-1 report, after receiving the public comments. Upon OMB approval of the revised EEO-1, EEOC will post a notice of its approval on its website, www.eeoc.gov and also notify EEO-1 filers of the approval and reporting requirements and deadlines.

PRA BURDEN

14. How was the burden calculation adjusted for the 30-day notice?

Although the estimate of the burden on employers has increased to reflect feedback on employer burden, the updated proposal actually reduces the work for employers, as compared to the 60-day notice. The EEOC adjusted the burden calculation in two significant respects. First, the EEOC accounted for establishment-level reporting costs, because it concluded that more employers will continue doing data entry at the establishment level in the next few years, as opposed to providing data from corporate headquarters. This change increased the burden estimate, because some employers file many EEO-1 reports at the establishment level. Second, the EEOC decided to account for a broader range of professionals who may be involved in preparing the EEO-1 report. The adjusted burden calculation accounts for time spent by a Chief Executive Officer, who may certify the report for some companies, the attorney who may review it, the senior and junior human resources staff and the software programmer who may oversee and run the reporting system, and finally, administrative staff. This change in approach added highly-paid professionals to the cost calculations.

Based on these revisions, EEOC estimates that the addition of pay data will increase the annual cost of time spent completing the EEO-1 report EEOC estimates that the addition of pay data will increase the annual cost of the time spent completing the EEO-1 report each year by about $25 million nationwide, or about $416 per EEO-1 filer. This is an estimate; some employers will have higher annual costs and others will have lower annual costs.

The final proposal also includes one-time implementation costs, which represents the time and expense to employers of changing their EEO-1 reporting systems. The EEOC estimated that the one-time implementation cost for all filers to be approximately $27 million, or about $446 per EEO-1 filer. Again, this is an estimate; some employers will have higher implementation costs and others will have lower implementation costs.