On July 14, 2016 the U.S. Equal Employment Opportunity Commission (EEOC) issued a revised version of its proposed rule expanding pay data collection from federal contractors with at least 50 employees and private employers with at least 100 employees. The revised proposal may be viewed here. Under the proposed rule, covered employers will be required to report the number of employees falling into each of twelve newly created pay bands based on aggregate Form W-2 wages as well as the total number of hours worked by employees in each band. The rule is intended to help the EEOC identify possible pay discrimination and assist employers in promoting equal pay in their workplaces.

The agency initially published the proposed rule last winter and made changes to the rule based on suggestions made during the initial public comment period. The key provisions of the proposed rule remain unchanged; however, the EEOC clarified certain provisions and modified others.

What are covered employers required to report? Despite many public comments that criticized the use of Form W-2 data as an oversimplified and potentially misleading indicator, the new proposed rule still requires covered employers to submit to the EEOC Form W-2 earnings data and actual hours worked for their employees. A new pay data component will be added to the EEO-1 report already used by employers to report gender, race and ethnicity of employees. Specifically, employers will be required to report aggregate Form W-2 wages (Box 1 on Form W-2) and hours worked in twelve pay bands for each of the 10 EEO-1 job categories and 14 gender, race and ethnicity categories currently on the form. The pay bands included in the new proposed rule are as follows:
 

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
12. $208,000 and over

 
Reporting “hours worked”. The revised proposal continues to require employers to report the number of hours worked for exempt and nonexempt employees. For nonexempt employees, employers must report actual hours worked as recorded for FLSA purposes. “Hours worked” will be reported for the total number of employees in each of the pay bands listed above by ethnicity, race, and gender. For exempt employees, employers will have the choice of reporting either a 40-hour week for full-time exempt and a 20-hour week for part-time exempt employees or, alternatively, providing an annual report for such employees with actual hours worked.

New “workforce snapshot” period. The "workforce snapshot" period when employers count the total number of employees for that year's EEO-1 report will be moved back to the fourth quarter (October 1 through December 31) in an effort to further align employers’ information-gathering obligations with those already required for Form W-2 purposes.

Delayed filing deadline. The new proposed rule also pushes back the due date for the first report that must include pay data to March 31, 2018. This will be the new filing deadline for EEO-1 reports moving forward. Current reporting requirements, however, have not changed, and those required to submit an EEO-1 report must still submit their 2016 reports by September 30, 2016. Employers will not need to submit reports for 2017, allowing more time to prepare the first expanded EEO-1 reports for the March 31, 2018 deadline. However, employers must still be prepared to start collecting data January 1, 2017.

Employer takeaway. In light of the EEOC’s continuing focus on pay disparities, and the additional data the EEOC will soon have at its disposal, employers should consider reviewing current pay systems and analyzing comprehensive pay equity to determine whether there are gender, race, or ethnicity-based disparities in compensation that cannot be explained by legitimate, nondiscriminatory business factors. Employers should also review whether their human resource information systems and payroll need to be integrated or new systems created by January 1, 2017 in order to capture 2017 calendar year data.

The final pay data collection rules should be finalized by the end of 2016. An additional 30-day comment period is open until August 15, 2016. Comments must be submitted to Joseph B. Nye, Policy Analyst, Office of Information and Regulatory Affairs, Office of Management and Budget, 725 17th Street N.W., Washington, DC 20503, email: oira_submission@omb.eop.gov. Commenters are also encouraged to send comments to the EEOC online at http://www.regulations.gov, which is the Federal eRulemaking Portal.

Bullard Law will continue to track and report on developments relating to this rule as the final regulations become available. Please feel free to contact us anytime with questions about this rule or any other labor, employment, or benefits issues of interest or concern to you.