EEOC’s Midlife Crisis

February 8, 2017

Employee Benefit & HR News

The Equal Employment Opportunity Commission (EEOC) wants comparable pay for comparable work and has been working long and hard to achieve it. All laws that the EEOC enforces prohibit pay discrimination. This would include, The Equal Pay Act and Title VII of the Civil Rights Act which are both over 50 years old. It also includes the Age Discrimination in Employment Act (ADEA), turning 50 this year, and the EEOC’s “newest” babies, Americans with Disabilities Act (ADA) in 1990 with amendment (ADAAA) in 2008 and Genetic Information Nondiscrimination Act (GINA) also in 2008.

So the EEOC is entering their midlife crisis. They are a little tired of the status quo and have decided to go a little further to enforce equitable pay. The EEOC has upped the game for the 2017 EEO-1 Report, and is boldly going where no other EEO-1 report has gone before: the inclusion of pay information for employers with over 100 employees.

According to EEOC Chair, Jenny R. Yang, “More than 50 years after pay discrimination became illegal it remains a persistent problem for too many Americans.” The EEOC used to rely on claims and investigations to uncover/discover inequity in pay, but now with the EEO-1 changes they are collecting pay data themselves. This is a significant step in addressing discriminatory pay practices.

The EEOC is partnering with the Office of Federal Contract Compliance Programs (OFCCP) to implement the new requirements, which add aggregate data on pay ranges and hours worked to the EEO-1 form. The new information will be reported for each of the 10 EEO-1 Job Categories (which have not changed) and within the new 12 established pay bands. Additionally, covered employers will be required to tally and report the number of hours worked for all the employees in each pay band. This way the EEOC and OFCCP can determine full-time vs part-time employees, or employees working a partial year. They will not require employers to report specific salaries of each individual employee; just aggregate salaries per job category.

So what is the EEOC going to do with all this information? According to the EEOC, the pay data will provide EEOC and OFCCP with insight into pay disparities across industries and occupations and strengthen federal efforts to combat 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. The EEOC is hoping employers will also use this data, to help evaluate their own pay practices. The EEOC plans to publish aggregate data that will help employers conduct their own analysis of their pay practices going forward.

The EEOC recognizes the demands the new reporting requirements have on the employers and has moved the 2017 EEO-1 report due date from September 30, 2017 to March 31, 2018. This allows employers time to adapt to the requirements. It will also allow employers to use existing W-2 pay reports, which are calculated based on the calendar year. Employers will use Box 1 of Form W-2 for reporting.

The employer may choose any pay period during the three-month “workforce snapshot period” to count its full and part-time employees for the EEO-1 report. Prior to the 2017 reporting year the “workforce snapshot period” was July 1 to September 30. The final rule has changed the “workforce snapshot” to a pay period between October 1st and December 31st for 2017 reporting year.

There are some limitations of the new system. For example, a number on a W-2 doesn’t always paint an accurate picture and sometimes an employer is permitted to pay an employee of the opposite sex differently, but those circumstances are limited and need to be thoroughly documented. Circumstances could include:

• A defined seniority system
• A defined, formal merit system based job performance
• A defined incentive system, based on quality or quantity of work
• Shift differentials

Employers should get prepared ahead of the submission of their pay data to the EEOC to fully grasp how these limitations and circumstances may impact their data. This is not the time to beg for forgiveness.

First, employers need to make sure they can accurately generate the information required. If you do not have a HRIS or payroll system that can pull the information together, this step could take some time. Because employers want to make sure they are comparing apples to apples, job titles and hours need to be correct, W-2 data gathered, and demographics need to be established. This data will support what is being sent on the EEO-1 report. So the employers need to get their data in order prior to determining if their pay strategies will withstand EEOC scrutiny.

Once the employer has collected all the data it is time to apply the compensation structure to the data. Common problems are salary grades that are outdated or not applied equitably, or not having any compensation structure. Those are easily detectable in an EEOC audit. Employers should have their compensation structure audited prior to submitting pay data for the 2017 EEO-1 report. Employers need to identify pay disparities and see if they can be justified before submitting the new form. Employers may even need to blow-up their current pay practice and put one in place that supports their actual compensation philosophy and practices. The most common steps to take are:

• Having the job’s essential functions defined in the job description
• Using accurate job descriptions to categorize jobs into salary classifications
• Develop salary grades consistently and fairly to determine pay
• Document all pay practices and policies
• Keep compensation plan up-to-date and applied equitably

After 50 years of letting employers manage their pay the EEOC is done with the honor system. At midlife, the EEOC is going to drive the issue home.

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