June 2019
Change is in the air, and it is more than just the longer days, green grass and blooming flowers. This article focuses on updates for employers on a controversial topic: pay data reporting.
Last month, we reviewed trends impacting employers in 2019 (read part one here, part two here, and part three here). This article continues the conversation on a hotly debated and litigated topic.
Reporting EEO-1 data is nothing new. What is new this year is that the Equal Employment Opportunity Commission (EEOC) has announced that employers must report pay data, broken down by race, sex and ethnicity (pay data reporting).
Pay data reporting has been a controversial topic. The EEO-1 report was revised under President Obama’s administration to add pay data (Component 2 data). The pay data reporting was suspended in 2017 under President Trump’s administration. Litigation ensued and employers have been waiting to find out what pay data they would be required to file, if any, and by when.
The EEO-1 Form is a report filed with the EEOC, as required by Title VII of the Civil Rights Act and amended by the Equal Employment Opportunity Act. The Act mandates that employers report employee demographic data by job category, sex, ethnicity and race (Component 1 data). This requirement has not changed.
Generally, all private employers with 100 or more employees (or a smaller employer that is an affiliate) are required to report Component 1 data on an annual basis. In addition, all federal contractors and first-tier subcontractors with 50 or more employees AND contracts of at least $50,000 are obligated to complete and file the report each year. Reporting is completed entirely online on the EEOC website, which includes instructions and FAQ’s.
Component 2 data is the subject of the controversy and litigation. It consists of wage information from Box 1 of the W-2 form and total hours worked for all employees by race, ethnicity and sex within twelve (12) pay bands. Reported hours worked should show actual hours worked by nonexempt employees (which is rather straightforward) and an estimated 20 hours per week for part-time exempt employees and 40 hours per week for full-time exempt employees.
The deadline to submit EEO-1 data on job category, race, sex and ethnicity was extended to May 31, 2019. That means, covered employers should have filed Component 1 data from any pay period from October through December of 2018 by the May 31st deadline (or if an extension was requested, by the extension deadline of June 14th).
Covered employers should prepare now to gather Component 2 data for the September 30th deadline (2017 and 2018 payroll data). This may involve complexity, depending on how pay data is stored, whether you use a third-party vendor, etc. Be sure you have the capacity and expertise to accurately capture, analyze and report the required data. If necessary, be prepared to reach out to technical and subject matter experts (in- house or external) to ensure you have the resources required to
comply with Component 2 reporting.
The EEOC expects to make the Component 2 portal available to employers by July 15th. How the data will be batched and uploaded has not yet been explained.
Employers may be able to seek an exemption, under some circumstances and at the EEOC’s discretion, if filing the information would cause an undue burden.
As of the date this article was completed for publication, according to the EEOC, EEO-1 filers should begin to prepare to submit Component 2 data by the September 30th deadline. Litigation is still pending, and it is critical for employers to stay tuned to the EEOC website for updates or modifications.
A driving force behind the new reporting requirements is pay equity, and experts suggest employers work with legal counsel to conduct a pay equity analysis. This would involve an evaluation of whether any differences in pay are based on legitimate, nondiscriminatory reasons and making appropriate adjustments for any disparities.
Amidst the controversy on the federal level, it is easy for state law requirements to get lost in the shuffle. Don’t forget that, in addition to Federal law, some employers may also be impacted by state affirmative action law requirements.
For example, in Minnesota, if an employer has more than 40 full-time employees on a single working day during the previous 12 months and holds or submits a bid or proposal for a state contract for goods or services in excess of $100,000, the employer is required to have a written affirmative action plan.
The Minnesota Human Rights Act requires businesses seeking to do business with the State of Minnesota to obtain a workforce Certificate of Compliance from the Minnesota Department of Human Rights prior to bidding on, responding to any requests for proposals, or executing any contracts or agreements for goods or services in excess of $100,000.
Another example is the State of Wisconsin. In Wisconsin, an affirmative action plan is required from a contractor who receives a state contract over $50,000 AND who has a work force of 50 or more employees as of the award date (unless exempt).
The plan is due to the contracting agency within fifteen working days of the award date of the state contract. The plan must have been prepared or revised not more than one year prior to the award date of the contract.
The U.S. Equal Employment Opportunity Commission (EEOC) announced on July 16, 2020 that it has voted unanimously to fund a statistical study with the National Academies of Sciences, Engineering, and Medicine’s Committee on National Statistics (CNSTAT) to conduct an independent assessment of the quality and utility of the EEO-1 Component 2 data for FY 2017 and 2018.
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About the Author
HR thought leader, Stacy Johnston, provides innovative HR solutions with a mission to support organizations in understanding and engaging their biggest competitive advantage… their employees. Johnston writes and speaks about contemporary HR topics. She is a licensed attorney and holds the SHRM-CP and PHR credentials.
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Cover Photo by Oli Dale on Unsplash
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