In our February 29, 2016 blog, we warned of concerns employers should have about the EEOC’s proposal to begin collecting pay data as part of the EEO-1 form, currently filed by employers with more than 100 employees and some federal contractors. In comments filed with the EEOC over the proposed regulations, employers raised these concerns, including a mismatch between the W-2 reporting period and the EEO-1 “snapshot” period, questions about how to account for the hours of salaried employees, and issues regarding data confidentiality. Employers and commentators also repeatedly questioned the utility of collecting aggregate data.
The good news. The EEOC has moved the deadline for all EEO-1 filers to March 31, 2018, for 2017 data, and will use a “snapshot” pay period from October 1, 2017, through December 31, 2017 (rather than July 1 – September 30, as required for the current EEO-1 report). That means that employers will have 18 months from their 2016 EEO-1 filing to prepare for the 2017 filing. It also means that W-2 data collected for 2017 tax filing will be available for the EEO-1 report. To address the concerns about how to account for the hours of exempt employees for whom hours are not tracked, the EEOC has given employers the option of assuming a 40-hour work week for full-time employees and a 20-hour work week for part-time employees. While this may ease the burden of reporting, employers should closely consider this choice, since many exempt employees receive higher pay because they routinely work more than 40 hours. Employers must be prepared for the possibility that an assumption made for ease of reporting may skew a disparity analysis of their pay data.
The bad news. The EEOC not surprisingly turned a deaf ear to concerns about confidentiality and the utility of aggregate pay data. In its revised proposal, the EEOC emphasized the steps it takes to maintain the confidentiality of its data, but failed to recognize that the OFCCP, with whom the data will be shared, is subject to fewer statutory restrictions regarding data it collects and is subject to FOIA requests. It also failed to recognize the significant security risks in such an electronic system, and the fact that in companies with small numbers of employees in any particular group, aggregate data may be tantamount to individual data. In addition, the EEOC swept aside concerns that aggregate data would be of limited utility (as OFCCP’s long experience has shown) and would create both false positives and false negatives. Employers will still risk being targeted by EEOC or OFCCP based on this data, and those targeted should expect to expend significant time and money to defend themselves.
Employers may comment on the revised proposal until August 16, 2016.
Opinions and conclusions in this post are solely those of the author unless otherwise indicated. The information contained in this blog is general in nature and is not offered and cannot be considered as legal advice for any particular situation. The author has provided the links referenced above for information purposes only and by doing so, does not adopt or incorporate the contents. Any federal tax advice provided in this communication is not intended or written by the author to be used, and cannot be used by the recipient, for the purpose of avoiding penalties which may be imposed on the recipient by the IRS. Please contact the author if you would like to receive written advice in a format which complies with IRS rules and may be relied upon to avoid penalties.
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