On September 29, 2016, the Equal Employment Opportunity Commission (EEOC) announced that it has received approval from the federal Office of Management and Budget to move forward with the use of a revised EEO-1 report. On the EEOC website, the agency has provided a copy of the form it expects to use to collect compensation data and other information from employers. (See https://www.eeoc.gov/eeoc/newsroom/release/9-29-16.cfm.)
Below, we have provided revised answers to questions that employers may have regarding EEOC’s actions. Please note that these questions and answers were developed by HR Analytical Services. EEOC has its own questions and answers that are available on its website at the address found above.
- Question: When will EEOC begin collecting compensation data as part of the annual EEO-1 report?
Answer: EEOC intends to begin collecting this information in the first quarter of 2018. EEO-1 reports will need to be completed no later than March 31, 2018 for this initial cycle of EEO-1 reports that include compensation data.
- Question: What does that mean for 2017?
Answer: There will be no EEO-1 reports submitted during 2017. EEO-1 reports for 2016 were due by September 30, 2016. EEOC will effectively be skipping a year of EEO-1 reports in order to give employers time to prepare for the first submission of compensation data and other new information.
- Question: What organizations are covered by EEOC’s requirement to provide compensation data?
Answer: Organizations with 100 or more employees would be required to provide compensation data under the revisions to the EEO-1 report. Currently, organizations with 100 or more employees must submit race, ethnicity, and gender data on an annual basis using 10 job categories EEOC has developed. Federal contractors and first-tier subcontractors with at least 50 employees must also submit race, ethnicity, and gender data to EEOC using these 10 job categories. Under EEOC’s changed requirements, federal contractors and subcontractors with fewer than 100 employees would be exempt from providing compensation data. Organizations such as primary and secondary public school systems that are currently exempt from completing the EEO-1 report would continue to be exempt from completing any portion of the EEO-1 report.
- Question: What will federal contractors and subcontractors that have between 50 and 99 employees be required to report?
Answer: These organizations will be required to provide demographic data on employees in the same manner these organizations have reported this data in the past.
- Question: What kind of employee “snapshot” will be used to report demographic information to EEOC?
Answer: Employers must provide information on all full-time and part-time employees who were employed during a payroll period selected by the employer between October 1 and December 31. This snapshot must include race, ethnicity, and gender information for each employee.
- Question: How will compensation data be provided to EEOC?
Answer: Employers will continue to report data using the 10 EEO-1 categories and EEOC’s race, ethnicity, and gender classifications. Compensation data will be reported within 12 pay bands for each EEO-1 job category. These 12 pay bands are bands that have been previously used for other data collection and reporting purposes by the Department of Labor’s Bureau of Labor Statistics. The 12 pay bands would be uniform for each EEO-1 job category (i.e. each EEO-1 job category will use the same pay bands). These bands are as follows:
- $19,239 and under
- $19,240 – $24,439
- $24,440 – $30,679
- $30,680 – $38,999
- $39,000 – $49,919
- $49,920 – $62,919
- $62,920 – $80,079
- $80,080 – $101,919
- $101,920 – $128,959
- $128,960 – $163,799
- $163,800 – $207,999
- $208,000 and over
- Question: What type of compensation data will employers be required to provide?
Answer: Employers will provide W-2 earnings on all employees shown in the employee snapshot. The W-2 earnings will be for a full calendar year. For example, for the EEO-1 report filed in 2018, employers will show W-2 earnings for all of 2017.
- Question: What happens if an employer uses an employee snapshot for a date other than December 31?
Answer: The employer would provide compensation data for an entire calendar year for whatever employees are included in the employee snapshot. As an example of how this would work, let us assume that an employer uses an employee snapshot as of October 15, 2017 for the 2018 EEO-1 report. The employer would show all 2017 W-2 earnings for the employees on that October 15 snapshot, even if certain employees on the October 15 employee snapshot left the company between October 16 and December 31.
- Question: Will additional data beyond demographic data and compensation data be provided to EEOC in the revised EEO-1 report?
Answer: Yes. Employers will be required to report the total number of hours worked for each employee found in the employee snapshot. Total hours worked will be reported using the same structure in which compensation data will be reported (i.e. by each race, ethnicity, and gender classification for the 12 pay bands within each EEO-1 job category). For any individual employee found in the employee snapshot, the employer should report total hours worked during the relevant calendar year. To return to our example of an employer using an employee snapshot as of October 15, 2017, the employer would show total hours worked by all employees on that snapshot during 2017, even if certain employees left the company between October 16 and December 31.
- Question: How should employers report hours for exempt employees?
Answer: Employers have choices on how to report hours worked for employees who are exempt from FLSA minimum wage and overtime requirements. Employers may show actual hours for exempt employees. Alternately, employers may use a proxy amount of 40 hours per week for each week a full-time exempt employee worked, and 20 hours per week for each week a part-time exempt employee worked. Thus, for a part-time exempt employee included in an October 15, 2017 snapshot who worked the 21 weeks between July 1, 2017 and November 30, 2017, an employer could use a proxy of 420 hours (i.e. 21 weeks times 20 hours per week). Note that a proxy may ONLY be used for exempt employees. Employers will be required to report actual hours worked for all non-exempt employees.
- Question: Will employers be required to change their compensation systems to match EEOC’s pay bands?
Answer: No. The 12 pay bands will be used for EEO-1 reporting only. Employers will not be required to use them for other purposes.
- Question: What happened to OFCCP’s proposal to collect compensation data on an annual basis?
Answer: The U.S. Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) abandoned its initiative to annually collect compensation data from federal contractors and subcontractors when EEOC proposed to collect compensation data as part of the EEO-1 report.
- Question: Will OFCCP have access to the compensation data that EEOC collects?
Answer: Yes, OFCCP will have access to this data. In fact, it has been suggested that OFCCP may use this data as part of the agency’s process of selecting federal contractors and subcontractors for affirmative action compliance reviews.
- Question: Will OFCCP continue to collect compensation information in other ways?
Answer: Yes. The letter that OFCCP sends to federal contractors and subcontractors at the start of an affirmative action compliance review has an itemized listing that requires the submission of individualized compensation data on every employee who is part of the workforce analysis in the affirmative action plan under review. OFCCP may also ask for additional compensation information during the course of a compliance review.
- Question: How will EEOC use the compensation and other new data collected from employers?
Answer: EEOC may use this data as part of investigations it conducts regarding claims of employment discrimination involving compensation. EEOC also intends to publish reports on compensation using aggregated data for various industry segments. These reports would supposedly allow employers to assess their pay practices against those of other employers in their industry.
While employers have some time to prepare for the filing of the 2018 EEO-1 report, employers should begin to consider the following questions:
- What kind of support will our HR information system vendor and/or our payroll system vendor be able to provide in completing the 2018 EEO-1 report?
- Who will be responsible for ensuring that we have all the data required for the new EEO-1 reports?
- How should we report hours worked for exempt employees?
- What kind of analysis should we do on our workforce and compensation data before providing it to EEOC?
- What should we use as a snapshot date for the demographic data to be used in the 2018 EEO-1 report?
The only one of these questions that appears to have a simple answer is the last question. It will probably be simplest for employers to use a December 31 employee snapshot date in order to match the calendar-year reporting that is required for W-2 earnings and hours worked.
There are many serious issues raised by the manner in which compensation data and other data will be collected by EEOC. For example, it is unclear what the value will be of collecting compensation-related data by EEO-1 job category and pay bands. Employers may have too many or too few employees in any particular box on the EEO-1 report to allow for meaningful analysis. Employers may also have too many dissimilar jobs in any particular EEO-1 category to allow for meaningful analysis. It is also unclear what EEOC will do to ensure the security of the data being provided on the revised EEO-1 report. The National Academy of Sciences (NAS) raised questions about data security when EEOC approached the NAS for input on the feasibility of collecting compensation data.
Regardless of the issues that employers may raise, EEOC appears to be ready to aggressively move forward with its plans to collect compensation data. Employers should carefully consider how they will respond to EEOC’s requirements to provide this data. Federal contractors and subcontractors should additionally consider whether the data being provided in the revised EEO-1 report might increase the possibility of an OFCCP compliance review.
Please note: Nothing in this article is intended as legal advice or as a substitute for any professional advice about your organization's particular circumstances. All original materials copyright © HR Analytical Services Inc. 2016