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Pending Rules on Pay Discrimination

Sep 29Jeff Matthews
Pay discrimination

The federal government is concerned that businesses and other governmental units are discriminating on pay based upon age, race, gender and other factors.

New compliance rules have been drafted that would improve the information flow to the federal government. The rules would require all employers of 100 or more employees to file a new form EEO-1.  Employers would be required to report the numbers of hours worked, identify their employees’ earnings over a 12-month period and to classify employees into job categories and race and ethnicity groups.

According to the U.S. Equal Employment Opportunity Commission’s website:

Too often pay discrimination goes undetected because of a lack of accurate information about what people are paid. The proposed pay data collection will provide a much needed tool to identify discriminatory pay practices where they exist in order to ensure that fair pay practices are put in place.

Employees may face retaliation for inquiring about wages. It is difficult for workers to remedy wage disparities if they cannot find out that they are being paid less.   Pay discrimination has real consequences for working Americans, and the families that depend on them. Eliminating or significantly reducing the pay gap will improve financial well-being for many hard-working Americans, help reduce the number of working poor, and benefit the nation’s economy.

Access to pay data will help EEOC and OFCCP (Office of Federal Contract Compliance Programs at DOL) identify and combat pay discrimination. EEOC proposes to collect pay data by sex, race, and ethnicity by job category from private employers, including federal contractors, with 100 or more employees through the EEO-1 report. Data collected from the proposed EEO-1 will help EEOC and OFCCP better understand the scope of the pay gap and focus enforcement resources on employers that are more likely to be out of compliance with federal laws.

EEOC and OFCCP are both addressing the continued existence of wage disparities based on gender, race, and ethnicity that limit equal pay and equal opportunities across industries for women and workers of color. Although some pay disparities may be explained by differences in education, career or experience, even when these factors are taken into account, significant unexplained earnings gaps remain between gender, racial, and ethnic groups.

EEOC will continue to work closely with the Department of Labor and the Department of Justice to coordinate an interagency approach on the use of pay data in enforcement efforts3. How would EEOC and OFCCP use this pay data?

The pay data will provide EEOC and OFCCP with insight into pay disparities across industries and occupations and strengthen federal efforts to combat pay discrimination. EEOC and OFCCP will use this data to more effectively focus agency investigations, assess complaints of discrimination, and identify existing pay disparities that may warrant further examination. This data will also help employers evaluate their own pay practices to prevent pay discrimination in their workplaces. EEOC will compile and publish aggregate data that will help employers in conducting their own analysis of their pay practices.[1]

The website defines the reporting categories as:

The data include seven race and ethnicity categories and ten job categories, by sex.

  • The ten EEO-1 job categories are: Executive/Senior Level Officials and Managers; First/Mid Level Officials and Managers; Professionals; Technicians; Sales Workers; Administrative Support Workers; Craft Workers; Operatives; Laborers and Helpers; Service Workers.
  • The seven race and ethnicity groups are: Hispanic or Latino, White (Not Hispanic or Latino); Black or African American (Not Hispanic or Latino); Native Hawaiian or Other Pacific Islander (Not Hispanic or Latino); Asian (Not Hispanic or Latino); American Indian or Alaska Native (Not Hispanic or Latino); and Two or More Races (Not Hispanic or Latino). [2]

While I believe all workers of comparable skill, tenure and education should be paid equally, this data collection cannot provide explanations of surface level discrimination. Thus the federal government will use the information to initiate inquiries and employers will be placed in the position of defending themselves and having to prove they are not discriminating. This rule will clearly increase the workload and therefore the staffing requirements of the EEOC and DOL.  Firms will be forced to collect data they may not currently have available.  Employers will be subject to inquiries and audits to prove they are paying their employees equally.

These rules are slated to take effect with the March 31, 2018 EEO-1 report which captures 2017 data. So companies will need to ensure they have the data collection methods available to comply effective 1/1/2017, or three months from now.

I strongly urge employers with more than 50 employees to discuss this reporting concern with their CPAs, payroll providers and time keeping solution providers.

[1] US Equal Employment Opportunity Commission website – https://www.eeoc.gov/employers/eeo1survey/2016_eeo-1_proposed_changes_qa.cfm, Questions and Answers Notice of Proposed Changes to the EEO-1 to Collect Pay Data from Certain Employers.  Accessed on September 29, 2016.

[2] US Equal Employment Opportunity Commission website – https://www.eeoc.gov/employers/eeo1survey/2016_eeo-1_proposed_changes_qa.cfm, Questions and Answers Notice of Proposed Changes to the EEO-1 to Collect Pay Data from Certain Employers.  Accessed on September 29, 2016.

photo credit: Sarah Mirk Equal Pay for Equal Work via photopin (license)

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