After a contentious rulemaking process, an administration change and finally a federal court order, it is now the new normal for many employers to send their pay equity data to the federal government.
For most private employers with at least 100 employees, as well as federal contractors with at least 50 employees, it’s a yearly routine to send the Equal Employment Opportunity Commission their employee demographic data through the required EEO-1 report.
But this year, those employers must also submit data on their employees’ W-2 pay and hours worked — otherwise known as the EEO-1 Component 2 — for the past two years by Sept. 30. But even as the commission lays out detailed instructions clarifying how to collect and submit the pay data, it remains unclear to employers how the government will use it.
Under Title VII of the Civil Rights Act, the EEOC has traditionally collected reports on the number of workers employers have of each race, ethnicity and sex in different job categories. The commission uses that information to support civil rights enforcement and track employment patterns of women and minorities in different industries or companies.
Many employer groups balked when the EEOC under the Obama administration proposed adding a pay data requirement to the EEO-1, which they argued would be burdensome and carried confidentiality risks.
After the Trump administration took over, the Office of Management and Budget froze the pay data rule in August 2017. The move triggered a lawsuit that led a federal court to order the EEOC in March to reinstate the rule and collect the Component 2 data this year — and not just for fiscal year 2018 but 2017 as well.
In the months since the court order, employers have been coming to terms with the idea of making the pay data filings to the EEOC.
“The biggest thing is that most employers have now accepted that this is not going away,” said Laura Mitchell, a principal in Jackson Lewis’ Denver office who counsels employers on pay equity and affirmative action issues. EEOC Commissioner Victoria Lipnic quashed any uncertainty about the Component 2 requirement in her remarks at a recent conference, Mitchell noted.
But what’s less clear is what use the EEOC will get out of all that pay data tied to employees’ sex, race and ethnicity, Mitchell said. “What’s going to happen with this data, what’s the EEOC going to do with it once they get it and are they going to share it with anybody?”
The EEOC’s likely first step is to take time to study the volumes of information it receives and assess its utility, Mitchell said. After that, the EEOC may decide to use, share or publicize the data in different ways.
The commission previously said it would not publish any Component 2 data that identified individual employees or employers. But it did suggest it might publish pay data by industry so employers could use it to benchmark their own pay practices, Mitchell said. She added there’s little to no talk of that use now, possibly because the commission is focused on implementing the rule. Still, it leaves a void of information regarding how the pay data might be presented to the public, if at all, she said.
It isn’t ruled out that the EEOC would share the data with the Office of Federal Contract Compliance Programs, Mitchell said, which monitors whether federal contractors are meeting equal employment opportunity requirements.
As for the privacy of the Component 2 data, the EEOC is supposed to protect it from disclosure under exceptions to the Freedom of Information Act.
A June Supreme Court ruling that favored employers could be relevant to Component 2’s protections against disclosure.
In FMI v. Argus Leader, the court ruled that the government wasn’t required to meet a South Dakota newspaper’s request for food stamp information it received from individual grocery stores. The decision reinforced protections over information a business sends to the government as long as the business normally takes steps to keep that information confidential.
The Component 2 data might not expose employers to much pay equity-related legal risk by itself.
Still, employers are mindful that it’s happening in the context of #MeToo, Colorado’s new Equal Pay for Equal Work Act and society’s heightened awareness of pay discrimination issues, Mitchell said.
“It’s just another part of the patchwork of pay transparency [concerns] … that are sweeping the nation.”
— Doug Chartier